K.M. JOSEPH BINOY v. STATE OF KERALA

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** ## **THE HONOURABLE MR.JUSTICE P.N.RAVINDRAN** **MONDAY, THE 2ND DAY OF JUNE 2014/12TH JYAISHTA, 1936** ## **WP(C).No. 10006 of 2014 (A)** **----------------------------** ## **PETITIONER(S):** **------------------------** **K.M. JOSEPH BINOY, MANAGING DIRECTOR, HOTEL SPRINGDALE HOTELS (P) LTD., VANDIPERIYAR, KUMALI, IDUKKI DISTRICT.** **BY ADV. SRI.GEORGE POONTHOTTAM.** ## **RESPONDENT(S):** **----------------------------** ## **1. STATE OF KERALA,** - **REPRESENTED BY THE SECRETARY TO GOVERNMENT, TAXES DEPARTMENT, GOVERNMENT SECRETARIAT, THIRUVANANTHAPURAM-695 001.** **2. THE EXCISE COMMISSIONER,** ## **THIRUVANANTHAPURAM-695 001.** **3. THE DEPUTY COMMISSIONER OF EXCISE, IDUKKI-685 586.** *** ADDL. R4 IMPLEADED** **4. JOHNKUTTY. C., AGED 69 YEARS, S/O.CHACKO, HOUSE NO.1, SBI COLONY, VENNALA P.O., KOCHI, KERALA, PIN-682 028.** ## *** IMPLEADED AS PER ORDER DATED 25/04/2014 IN I.A. NO.5530/2014.** **R1 TO R3 BY SPL. GOVT. PLEADER MR.TOM K.THOMAS. ADDL. R4 BY ADV. SRI.A.G.BASIL.** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 02-06-2014, ALONG WITH WP(C).NO.10104 OF 2014 AND CONNECTED CASES, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **rs.** ## **WP(C).No. 10006 of 2014 (A)** ## **APPENDIX** ## **PETITIONER'S EXHIBITS:-** **EXHIBIT P1 : TRUE COPY OF THE BROCHURE OF THE PETITIONER'S HOTEL.** - **EXHIBIT P2 : TRUE COPY OF THE DETAILS OF THE PAYMENT EFFECTED ON MONTHLY BASIS.** - **EXHIBIT P3 : TRUE COPY OF THE LUXURY TAX RETURN FILED IN FORM NO.1.** - **EXHIBIT P4 : TRUE COPY OF THE GO(MS) NO.56/2014/TD DATED 02-04-2014.** - **EXHIBIT P5 : TRUE COPY OF THE APPLICATION GIVEN BY THE PETITIONER FOR RENEWAL OF LICENSE.** - **EXHIBIT P6: TRUE COPY OF THE COMMUNICATION NO.ID2-2525/14 DATED 07/04/2014 GIVEN BY THE PUBLIC INFORMATION OFFICER, EXCISE DIVISION OFFICE, IDUKKI.** - **EXHIBIT P7: TRUE COPY OF THE LETTER DATED 07/04/2014 OF THE PETITIONER.** ## **RESPONDENT'S EXHIBITS:-** ## **NIL.** ## **//TRUE COPY//** ## **P.A. TO JUDGE** **rs.** ## **P.N.RAVINDRAN, J.** **=-=-=-=-=-=-=-=-=-=-=-=-=** **W.P.(C)Nos.10006, 10104, 10106, 10107, 10264, 10265, 10266, 10271, 10272, 10273, 10276, 10282, 10283, 10284, 10285, 10291, 10298, 10305, 10309, 10317, 10318, 10322, 10323, 10326, 10327, 10329, 10331, 10362, 10367, 10368, 10388, 10406, 10526, 10635, 10744, 10798, 10827, 10841, 10991, 11106, 11107, 11109, 11114 & 11410 of 2014 =-=-=-=-=-=-=-=-=-=-=-=-=-=-= Dated this the 2[nd] day of June, 2014** ## **JUDGMENT** These writ petitions are filed challenging G.O.(Ms)No.56/ 2014/TD dated 2.4.2014, a copy of which is produced as Ext.P4 in W.P.(C)No.10827 of 2014. The petitioners also seek renewal of the FL3 licenses issued to them. The brief facts are as follows:- 2. By an amendment to rule 13 of the Foreign Liquor Rules which was introduced pursuant to the Abkari Policy which was announced on 17.8.2011, State of Kerala decided to dispense with the fresh grant of FL3 licenses to hotels which do not have three star classification. This was done by deleting the words 'three star' from rule 13(3) of the Foreign Liquor Rules. Consequently, three star hotels which did not already have a license became ineligible for the grant of an FL3 license. The State also introduced rule (3E) in rule 13 of the Foreign Liquor Rules and stipulated that no new **W.P.(C)No.10006 of 2014 & connected cases.** **2** FL3 license shall be granted to hotels which are located within a radius of three kilometers in Grama Panchayats and one kilometer in Municipal Corporation/City Corporation, from another hotel having an FL3 license granted under the rules. 3. The validity of the amendments to the Foreign Liquor Rules was considered by a Division Bench of this Court in **Surendra Das B. v. State of Kerala** [2012 (3) KHC 653]. By that judgment, the Division Bench of this Court declared the amendments as unconstitutional and directed the State to consider and grant FL3 licenses to all eligible hotels with three star classification and above/heritage classification, based on the unamended rules. The State of Kerala carried the matter in appeal to the Apex Court. The appeals were heard and disposed of by judgment delivered on 5.3.2014 vide **State of Kerala v. Surendra Das** [2014 (1) KLT 948 (SC)]. The Apex Court upheld the decision of the Division Bench of this Court to the extent it struck down rule 13(3E) of the Foreign Liquor Rules. The decision of the Division Bench was reversed on all other aspects. The Apex Court upheld the deletion of three star hotels from the category of hotels eligible for an FL3 license under rule 13(3) of the Foreign Liquor Rules. The Apex Court also directed that the proposal in the Abkari Policy to delete four star hotels also **W.P.(C)No.10006 of 2014 & connected cases.** **3** from rule 13(3) should not be implemented until the report of the One Man Commission for reviewing the Abkari Policy is received and until the State takes action against non-standard restaurants covered by the sixth and seventh provisos to rule 13(3) of the Foreign Liquor Rules. 4. It was pursuant to the judgment of the Apex Court that the State Government issued G.O.(Ms)No.56/2014/TD dated 2.4.2014. The aforesaid Government order is extracted below in full:- _“Government examined the request of the Excise Commissioner in the light of the judgment of the Hon'ble Supreme Court, the legal opinion of the Advocate General and all aspects of the issue and are pleased to order the below:-_ - _(i) the action of the Excise Commissioner in having cancelled the FL3 licenses of the 8 hotels is ratified._ - _(ii) The renewal of FL3 licenses of hotels, except 418 non standard bar hotels mentioned in the judgment of the Supreme Court, be provisionally done, as an ad interim arrangement, subject to the following conditions;_ - _(a) The renewal shall be purely provisional or ad interim subject to it's cancellation or withdrawal before it's date of completion._ - _(b) The renewal shall be subject to the decision to be taken by the Government as a matter of policy on the recommendation of the One Man Commission_ - _(c) The renewal will be subject to the decision taken by the Government immediately after the cessation of the model code of conduct for the_ **4** ## **W.P.(C)No.10006 of 2014 & connected cases.** _election._ - _(d) Full rental as per the current fee will be collected with a rider that the licensees shall be entitled for proportionate reduction in the unexpired period and also entitled to be refunded in the event of cancellation._ - _(iii) The issue of renewal of the FL3 licences of the non-standard bar hotels mentioned in the Supreme Court order is deffered till the receipt of the recommendations of Secretary (Taxes) on the report of the One Man Commission and it's consideration by the Government. The Secretary Taxes will submit the report within one month.”_ 5. These writ petitions are filed contending that while FL3 licenses issued to hotels which have only two star standards have been renewed, licenses have not been renewed in respect of 418 hotels on the ground that they are non-standard hotels which lack hygiene, though many among the hotels have since been upgraded and have better facilities and standards than the hotels in respect of which, the licenses have been renewed. 6. It is evident from a reading of the judgment of the Apex Court that the State of Kerala is bound to take a decision in respect of the hotels governed by the sixth and seventh provisos to rule 13 (3) of the Foreign Liquor Rules. The Apex Court has in paragraph 37 of its judgment observed as follows:- **W.P.(C)No.10006 of 2014 & connected cases.** **5** _“37. In the circumstances, although we do not dispute the power of the State Government to bring about the necessary reform, by modifying the rules, it has got to be justified on the touchstone of the correlation between the provision and the objective to be achieved. If that correlation is not established, surely the rule will suffer from the vice of arbitrariness, and therefore will be hit by Art.14. The State Government has introduced awareness programmes in this behalf and, it ought to continue with that. It should also take steps to see to it that hotels with poor hygiene standards are not allowed to function. We are informed that the State Government has appointed a one-man commission for reviewing the Abkari Policy, by issuing a necessary notification on 23.1.2013. 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.”_ 7. It cannot therefore be disputed that the Government are duty bound to consider whether the 418 hotels referred to in the report of the Controller and Auditor General of India on the working of Kerala Excise Department for the year 2006-2007 to 2010-2011, are entitled to have the FL3 licences renewed. It was in the wake of the directions issued by the Apex Court that the Government issued G.O(MS) No.56/2014/TD dated 2.4.2014 wherein it inter alia directed that the issue regarding renewal of the FL3 licences of the non-standard bar hotels mentioned in the judgment of the Supreme **W.P.(C)No.10006 of 2014 & connected cases.** **6** Court is deferred till the recommendations of Secretary (Taxes) on the report of the One Man Commission are received and it is considered by the Government. By that order the Government also directed the Secretary (Taxes) to submit the report within one month. No exception can therefore be taken to the stand taken by the Government in Ext.P4. 8. During the course of arguments today, Sri.Tom K. Thomas, learned Special Government Pleader appearing for the State of Kerala submitted on instructions that the recommendations of the Secretary (Taxes) on the report of the One Man Commission were received by the Government on 15.5.2014, that the recommendations of the Secretary (Taxes) on the report of the One Man Commission and the report of the One Man Commission are under the consideration of the Government and that the Government will take a final policy decision in the matter within an outer limit of 30 days from today. 9. In the light of the aforesaid submission made on behalf of the State Government, I am of the opinion that the proper course would be to dispose of these writ petitions with a direction to the State Government to take a final policy decision on the question of renewal of the FL3 licences earlier issued to the 418 hotels referred **W.P.(C)No.10006 of 2014 & connected cases.** **7** to in the report of the Controller and Auditor General of India, on the working of the Kerala Excise Department, expeditiously and in any event within an outer limit of one month from today. I accordingly dispose of these writ petitions with a direction to the State Government to take a final policy decision on the question of renewal of the FL3 licences earlier issued to the 418 hotels referred to in the report of the Controller and Auditor General of India on the working of the Kerala Excise Department, expeditiously and in any event within an outer limit of one month from today. Sd/- ## **P.N.RAVINDRAN,** **(JUDGE)** ## **vpv/vps**