M/S Cherakulam Tower, Pudukkad, Thrissur v. Commissioner of Excise, Excise Commissionerate, Thiruvananthapuram; Deputy Commissioner of Excise, Excise Division Office, Thrissur; K.T. Mathew

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR. JUSTICE DEVAN RAMACHANDRAN WEDNESDAY, THE 23RD DAY OF AUGUST 2017/1ST BHADRA, 1939 WP(C).No. 13049 of 2011 (E) ---------------------------- PETITIONER : -------------------- M/S.CHERAKULAM TOWER PUDUKKAD, THRISSUR, REPRESENTED BY ITS MANAGING PARTNER MR.JOSEPH JOSEPH. BY ADVS.SRI.N.RAGHURAJ SMT.K.AMMINIKUTTY SRI.RAJU JOSEPH (SR.) RESPONDENTS : --------------------- 1. THE COMMISSIONER OF EXCISE EXCISE COMMISSIONERATE, THIRUVANANTHAPURAM - 695 001. 2. THE DEPUTY COMMISSIONER OF EXCISE, EXCISE DIVISION OFFICE, THRISSUR - 680001. 3. K.T.MATHEW, KATTIVEETTIL HOUSE, KEEZHOOR, CHANGANASSERY,, IRITTY - 670 703. R,R3 BY ADV. SRI.K.R.AVINASH (KUNNATH) R1 & 2 BY SR. GOVERNMENT PLEADER SRI.V.MANU THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 23-08-2017, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WP(C).No. 13049 of 2011 (E) ## APPENDIX ## PETITIONER'S EXHIBITS : EXT.P1 : TRUE PHOTOCOPY OF THE DEED OF PARTNERSHIP DATED 29.05.1995 EXT.P2 : TRUE PHOTOCOPY OF THE SAID FL3 LICENSE (LICENSE NO.TSR 1) EXT.P3 : TRUE PHOTOCOPY OF THE SAID NOTICE BEARING NO.2-1485/2011-1 DATED 19.3.2011 EXT.P4 :TRUE PHOTOCOPY OF THE SAID COMMUNICATION BEARING NO.R2-2007/2011 DATED 30.3.2011 EXT.P5 : TRUE COPY OF THE SAID COUNTER AFFIDAVIT FILED BY 3RD RESPONDENT IN WPC.NO.10787/2011 EXT.P6 : TRUE PHOTOCOPY OF THE JUDGMENT DATED 7.4.2011 IN WPC.NO.10787/2011 EXT.P7 : TRUE PHOTOCOPY OF THE SAID PROCEEDINGS OF THE SECOND RESPONDENT BEARING ORDER NO.R2-1485/2011 DATED 2.5.2011 EXT.P8 : TRUE COPY OF THE LETTER GIVEN BY THE SECOND RESPONDENT DATED 23.6.2016 EXT.P8 : TRUE COPY OF THE APPLICATION FOR FL-11 LICENCE DATED 22.06.2016 (EXT.P8 IN I.A.NO.10263/2016) EXT.P9 : TRUE COPY OF THE AFFIDAVIT FILED BY THE PETITIONER ALONG WITH THE APPLICATION DATED 22.06.2016 EXT.P10 : TRUE COPY OF THE DEMAND DRAFT ISSUED BY FEDERAL BANK, VADAKKANCHERY BRANCH DATED 20.06.2016 EXT.P11 : TRUE COPY OF THE CERTIFICATE ISSUED BY THE INSPECTOR, ABKARI WORKERS WELFARE FUND BOARD, THRISSUR, DATED 21.06.2016 RESPONDENTS' EXHIBITS : EXT.R2(a) : A TRUE PHOTOCOPY OF THE COMPLAINT DATED 14.03.2011 SUBMITTED BY THE THIRD RESPONDENT TO THE SECOND RESPONDENT EXT.R2(b) : A TRUE PHOTOCOPY OF THE JUDGMENT DATED 21.01.2011 OF THIS HON'BLE COURT IN ARBITRATION APPEAL NO.55 OF 2010 EXT.R2(c) : A TRUE PHOTOCOPY OF THE FORM A REGISTER PERTAINING TO WRIT PETITIONER FIRM. EXT.R2(d) : A TRUE PHOTOCOPY OF THE RECEIVER'S REPORT DATED 28.02.2011 I A.O.P.NO.142/2010 BEFORE THE HONOURABLE DISTRICT COURT, THRISSUR EXT.R2(e) : A TRUE PHOTOCOPY OF THENOTARIZED COPY OF THE PARTNERSHIP DEED DATED 29.05.1995 EXT.R2(f) : A TRUE PHOTOCOPY OF THE NOTRARIZED COPY OF THE PARTNERSHIP DEED DATED 31.12.2005 WP(C).No. 13049 of 2011 (E) :2: EXT.R2(g) : A TRUE PHOTOCOPY OF THE NOTARIZED COPY OF THE PARTNERSHIP DEED DATED 01.04.2006 EXT.R2(h) : A TRUE PHOTOCOPY OF THE STATEMENT DATED 23.03.2011 OF SHRI.JOSEPH JOSEPH TO THE THEN CIRCLE INSPECTOR OF EXCISE, IRINJALAKKUDA EXT.R2(i) : A TRUE PHOTOCOPY OF THE COVERING LETTER DATED 14.08.2017 OF THE REGISTRAR OF FIRMS EXT.R2(j) : A TRUE PHOTOCOPY OF THE FORM A REGISTRAR DATED 14.08.2017 /TRUE COPY/ P.A TO JUDGE AV ## **DEVAN RAMACHANDRAN, J.** ------------------------------------------------ W.P.(C).No.13049 of 2011 -----------------------------------------------Dated this the 23[rd] day of August, 2017 ## **J U D G M E N T** The petitioner claims to be a partnership firm registered under the provisions of the Indian Partnership Act, 1932. They have produced on record Ext.P1, which is the Certificate of Registration of the Firm dated 29.05.1995. The petitioner says that as per Ext.P2, the licence applied for by the firm, under the Kerala Abkari Act and Rules thereunder, was issued in the name of the firm and that they were thus entitled to retail in foreign liquor. The controversy erupted when new partners were inducted and disputes began between them. This appears to have lead to various proceedings against the partners _inter se,_ finally leading to the refusal of the Authorities to renew the FL3 licence enjoyed by the firm. The petitioner has, therefore, filed this writ petition seeking _inter alia_ that Ext.P2 licence in the name of Sri.Joseph Joseph, Managing Partner of the Firm, be renewed for the year 2011-12. Ext.P7 order refusing the renewal is also sought to be quashed. 2. I have heard the learned Senior Counsel Sri.Raju Joseph assisted by Sri.Joseph Antony appearing for the petitioner; the learned Senior Government Pleader appearing on behalf of respondents 1 and 2 and Sri.K.R.Avinash appearing on behalf of the 3[rd] respondent. W.P.(C).No.13049 of 2011 2 3. The pleadings on record would indicate that the petitioner firm was enjoying an FL3 licence under the Abkari Act and Rules, till 2011. The Authorities refused to renew the licence as per Ext.P7 on the ground that the firm had been reconstituted without their knowledge and that, such action amounts to violation of Rule 19 of the Foreign Liquor Rules. Since the underpinning of the submissions in this case rests on Sub clauses (i), (ii) & (iii) of Clause 19, I deem it appropriate to extract it for a full reading as under : _“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 or 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.1,00,000 (Rupees one lakh only).”_ The allegation of the Authorities is that the Firm had been reconstituted several times, by addition and deletion of partners without their permission which thus amounts to a violation of Clause 19 and this is the reason stated in Ext.P7 to deny renewal of licence to the petitioner. However, the learned Senior Counsel Sri.Raju Joseph, referring to Sub rule (ii) of Rule 19 as above, submits that W.P.(C).No.13049 of 2011 3 every reconstitution of partnership may not always result in change of ownership and he vehemently asserts that it is only in the case of reconstitution which results in a change of ownership that the rigour of Rule 19 would apply. According to him, in this case even though the Firm was reconstituted, such reconstitution did not result in change of ownership. This is a very ingenious submission because the way Sub Clause (ii) is written, it certainly would give some cause for such an interpretation. What is intended by Rule 19 is to stop reconstitution of a Firm which results in change of ownership. If it is possible, as is contended by the learned Senior Counsel, that a reconstitution can be done, without entailing a change of ownership, obviously the rigour of Rule 19 would not apply. I will examine this issue in some detail after some essential and constitutive facts are first stated because the specific submissions of the learned Senior Counsel is based on certain peculiar factual situations available in this case. 4. According to the allegations made against the Firm by the concerned Authorities, the Firm was reconstituted at least twice before Ext.P7 was issued. According to the Authorities, the Firm was reconstituted on 01.04.2006 and 21.12.2006. The reconstituted partnership deed dated 01.04.2006 has been produced on record by the respondents as Ext.R2(g) and another reconstituted deed, alleged to have been presented before the Registrar of Firms on W.P.(C).No.13049 of 2011 4 21.12.2006, has been produced on record as Ext.R2(f). As per the respondents, even though Ext.R2(f) is dated 31.12.2005, it was presented before the Registrar of Firms only on 21.12.2006. It is therefore, they say that the Firm was reconstituted on 01.04.2006 and thereafter, on 21.12.2006. In the additional counter affidavit filed on behalf of the respondents, it is added that there was another reconstitution in the year 2008 which had not been brought to the notice of the officials earlier and that it is therefore not mentioned in Ext.P7. These pleadings are seen made by the official respondents based on the copy of the Form A Register issued by the Registrar of Firms to them along with a covering letter. The copy of the said covering letter has been placed on record as Ext.R2(i). 5. The learned Senior Counsel Sri.Raju Jospeh in response to the above pleadings submits that it is true that a partnership deed dated 01.04.2006 was presented before the Registrar of Firms. However, according to him, it was never acted upon and there was no change in the partnership resulting in a change of ownership any time in spite of it being presented before the Registrar of Firms. He states several reasons in support of this submission of his. He asserts that, even though the 4[th] respondent and his sons were intended to be inducted into the Firm as per Ext.R2(g) dated 01.04.2006, they were never so inducted on account of certain disputes that arose between them soon thereafter. He says that, as W.P.(C).No.13049 of 2011 5 is clear from the contents of the additional counter affidavit filed on behalf of the respondents, these facts are virtually admitted or at least conceded to be known to the respondents. He refers to paragraph 12 of the said counter affidavit which reads as under : _“12. On 01.04.2005, Rule 19 of Foreign Liquor Rules (hereinafter referred in this Additional Counter Affidavit as the “FL Rules” for brevity and convenience) was amended whereby reconstitution of partnership made by addition or deletion of partners would be deemed to be transfer of licence. The said amendment was incorporated as per SRO No.293 of 2005 dated 23.03.2005 with effect from 01.04.2005. On 31.12.2005, as discernible from Exhibit R2(f) partnership deed, one Mr.M.J.Thomas and another Mathew Joseph retired from the partnership. On 01.04.2006, Smt.Pushpa Joseph ceased to be a partner and Sri.K.T.Mathew, Shri.Nishad Mathew and Shri.Nidhimon Mathew were inducted as partners. Information regarding reconstitution of the Partnership is revealed from the copies of the partnership deed as well as, copies of the Form A Register of Firms (maintained in terms of Section 59 of the Indian Partnership Act) as well as the judgments of this Hon'ble Court in Arbitration Appeal No.55 of 2010 and copies of Parties Receiver's Reports in A.O.P.No.142 of 2010 before the District Court, Thrissur. The reconstitution of partnership dated 31.12.2005 (reported to be Registrar of Firms on 21.12.2006) and 01.04.2006 are in violation of the Rule 19 of the FL Rules. As per Rule 13 B of FL Rules, the Deputy Commissioner of Excise is entitled to renew the FL-3 Licence only if there was no change in the nature, content or scope of the licence. He is not entitled to renew the licence of the partnership reconstituted without prior sanction of the Commissioner of Excise in so far as the same amounts to change in the nature, scope and_ W.P.(C).No.13049 of 2011 6 _content of licence.”_ The learned Senior Counsel, therefore, says that it is indubitable from even the statements contained in the counter affidavit, as extracted above, that the alleged reconstitution of the Firm on 01.04.2006 never took place and that it was never acted upon by either the existing partners or by the 4[th] respondent, who was intended to be inducted as a partner. It is thus the specific contention of the learned Senior Counsel that the rigour of Rule 19 would not apply in a case of this nature, even assuming that there were reconstituted partnership deeds presented before the Registrar of Firms, and that it would not turn anything since it was never acted upon and there was no change of ownership. 6. I have considered these submissions in detail. As I have already said above, this is certainly an interesting way in which the circumstances have been explained. I am not sure if these facts have been brought to the notice of the Authorities, while passing Ext.P7 and I am fairly certain that they were not informed of this even by the petitioner. Since the evaluation of the submissions of the learned Senior Counsel as above would depend upon factual circumstances including assessment and examination of documents and other attended papers, I do not think it would be within the province of this Court, while acting under Article 226 of the Constitution of India, to delve into or affirmatively state upon it W.P.(C).No.13049 of 2011 7 taking into account the well recognised limitations of jurisdiction while acting under writ jurisdiction. These are matters which the Authorities certainly may have to consider and it will be up to the petitioner to place all these circumstances and factors before the concerned Authorities in justification of their claim. 7. At this point of time, the learned Senior Government Pleader submits that, the petitioner cannot claim a licence, either under FL3 or under FL11, for two additional reasons. The first being that since the property of the petitioner is situated on a National Highway, the rigour of the judgment of the Honourable Supreme Court in _**State of Tamil Nadu v. K.Balu [2017 (1) KHC 26]**_ would apply. The second reason is that since the petitioner was not granted renewal of the licence from the year 2014, they would not be entitled to seek a renewal for this year or for the year next. The first of the above submissions is certainly tenable because as long the property continues to be on the National Highway, the constrains of the ratio in _**K.Balu**_ 's case (supra) would apply and I am certain that the petitioner would not be in a position to seek a Licence, when the rigour of the said judgment is operative. However, with respect to the entitlement of the petitioner to seek renewal of licence is concerned, I cannot find favour with the contention of the learned Government Pleader, that it cannot be granted because the petitioner had not been given such licence W.P.(C).No.13049 of 2011 8 from the year 2014, because I see that this writ petition was filed as early as in the year 2011 and under interim orders of this Court, the licence was renewed until 2014. Hence, merely because the petitioner has not been renewed his licence from 2014, I do not think it will be justified to hold that they would not be entitled for renewal for the years subsequent. However, any further grant is certainly subject to the ratio of the judgment of the Honourable Supreme Court in _**K.Balu**_ 's case (supra). As long as the Authorities feel that the rigour in _**K.Balu**_ 's case (supra) applies, the petitioner would not be entitled to obtain a licence. This is a matter which the Authorities will have to consider, when the petitioner makes an application for the licence. 8. In such circumstances and for the reasons that I have recorded above, I order this writ petition directing the petitioner to apply for renewal of its licence before the 1[st] respondent Commissioner of Excise within a period of 15 days from the date of receipt of a copy of this judgment and on such application being received by the 1[st] respondent, he shall consider the same and hear the petitioner as to whether provisions of Rule 19 of the Foreign Liquor Rules would apply against such renewal. The petitioner would be entitled to place all its contentions before the Commissioner including that there was no reconstitution of the Firm resulting in change of ownership and that, all the partnership deeds W.P.(C).No.13049 of 2011 9 referred to in this judgment were not acted upon and, therefore, that the provisions of Rule 19 would not apply to their case. The 1[st] respondent will be obligated to consider these contentions and if he finds that the petitioner is in violation of Rule 19 on account of undisclosed and unreported reconstitution of the Firm, he shall then consider whether the petitioner can be given the benefit of compounding of offences under Section 67 of the Abkari Act. Needless to say, since the offence under Rule 19 can be found against the petitioner only in the year 2006 or 2008, as the case may be, the order for compounding, if permitted, would be made with reference to the provisions applicable to those years and not on the basis of provisions as is available today. Once the petitioner is thus allowed to compound the offence, the 1[st] respondent will thereafter decide whether he would be entitled to the grant of a licence, either under FL3 or FL11, subject of course to the judgment in _**K.Balu**_ 's case (supra) . This writ petition is thus ordered. **Sd/DEVAN RAMACHANDRAN, JUDGE.** AV