M/S Golden Bar, Kodakara, Thrissur District v State of Kerala & Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** **PRESENT:** **THE HONOURABLE MR. JUSTICE A.V.RAMAKRISHNA PILLAI** **FRIDAY, THE 7TH DAY OF NOVEMBER 2014/16TH KARTHIKA, 1936** ## **WP(C).No. 10280 of 2014 (H)** **----------------------------** **PETITIONER:** ## **------------------** **M/S.GOLDEN BAR, KODAKARA, THRISSUR DISTRICT, REPRESENTED BY ITS MANAGING PARTNER, K.R.SANTHOSHKUMAR, AGED 46 YEARS, S/O.LATE K.V.RAMAKRISHNAN.** **BY SRI.C.C.THOMAS (SENIOR ADVOCATE) ADVS.SRI.M.G.KARTHIKEYAN SRI.NIREESH MATHEW** **RESPONDENT(S):** **-------------------------** ## **1. STATE OF KERALA,** - **REPRESENTED BY SECRETARY, TAXES (A) DEPARTMENT, GOVT. SECRETARIAT, THIRUVANANTHAPURAM - 695 001.** **2. THE EXCISE COMMISSIONER, COMMISSIONERATE OF EXCISE, THIRUVANANTHAPURAM- 695 001.** ## **3. THE DEPUTY COMMISSIONER OF EXCISE,** - **THRISSUR - 680 001.** ## **4. THE CIRCLE INSPECTOR OF EXCISE,** - **THRISSUR - 680 001.** **R1-R4 BY SPECIAL GOVERNMENT PLEADER SRI.TOM K.THOMAS** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 24-07-2014 ALONG WITH WPC.10024/2014 & WPC.10292/2014, THE COURT ON 07-11-2014 DELIVERED THE FOLLOWING:** **mbr/** **WP(C).No. 10280 of 2014 (H) ---------------------------------------** ## **APPENDIX** **PETITIONER(S)' EXHIBITS: ------------------------------------EXT.P1: PHOTOCOPY OF THE FL-3 LICENSE ISSUED BY THE EXCISE COMMISSIONER TO THE PETITIONER'S HOTEL. EXT.P2: PHOTOCOPY OF THE STAR CLASSIFICATION ORDER DATED 27/7/2009 ISSUED BY THE INDIA TOURISM, CHENNAI. EXT.P3: PHOTOCOPY OF THE DECISION, 2014() KLT 948(SC) STATE OF KERALA VS. SURENDRA DAS. EXT.P4: PHOTOCOPY OF THE AFFIDAVIT DATED 28/8/2013 FILED BEFORE THE HON'BLE SUPREME COURT IN SLP(C) NO.26241/2012. EXT.P5: PHOTOCOPY ORDER, GO(MS) NO.56/2014/TD DATED 2/4/2014 ISSUED BY THE 1ST RESPONDENT.** **RESPONDENT(S)' EXHIBITS: - NIL ---------------------------------------** ## **/TRUE COPY/** **P.S. TO JUDGE** ## **mbr/** ## A.V.RAMAKRISHNA PILLAI, J. = = = = = = = = = = = = = = = = = W.P(C) Nos.10280, 10292 and 10024 of 2014 = = = = = = = = = = = = = = = = = = = = = = Dated this the 7[th] day of November, 2014 ## JUDGMENT The petitioners who are holding three star classified hotels and conducting the same with FL-3 licence under Rule 13 (3) of the Foreign Liquor rules have come up before this Court for a declaration that their hotels having three star classification are entitled to renew their licence for the year 2014-15 and for other consequential reliefs. 2. The petitioner in W.P(C) No.10280 of 2014 is having FL3 licence as evident from Ext.P1 dated 13.9.91 whereas the petitioner in W.P(C) No.10024 of 2014 is having such a licence from 13.8.90. The petitioner in W.P(C) No.10292 of 2014 is having such a licence from 2.8.93 onwards. The petitioner in W.P(C) No.10280 of 2014 upgraded the hotel as three star as per Ext.P2 certificate from 20.7.2009. The petitioner in W.P(C) No.10024 of 2014 upgraded its hotel as three star as per Ext.P2 certificate from 30.10.2007 and the petitioner in W.P(C) WP(C).10280, 10292 and 10024/ 2014 **-:2:-** No.10292 of 2014 upgraded its hotel as three star as per Ext.P2 certificate from 20.08.2008. The validity of the said classification in the case of the petitioner in W.P(C) No.10280 of 2014 is upto 20.8.2014 and in the case of the petitioner in W.P (C) No.10024 of 2014 is upto 4.12.2019 and the petitioner in W.P(C) No.10292 of 2014 is upto 2018. The petitioners further allege that the licenses were renewed yearly as per a policy and all the existing licenses functional on 31[st] March is entitled to get renewal. 3. It was further alleged that the Government in compliance of the judgment of the Apex Court in State of Kerala v. Surendra Das [2014 (1) KLT 948 (SC)] have decided to renew the licence of three star and above classified hotels. The name of the hotel of the petitioner in W.P(C) No.10280 of 2014 was included as item no.39 in the list of 353 hotels submitted along with the affidavit by the State on 20.8.2013 before the Apex Court. 4. The name of the petitioner in W.P(C) No.10024 of 2014 was included as item no.269 in the list submitted along with the WP(C).10280, 10292 and 10024/ 2014 **-:3:-** affidavit by the State before the Apex Court. The name of the petitioner in W.P(C) No.10292 of 2014 was included as item no.1 in the list of 65 upgraded hotels submitted along with the affidavit. 5. The grievance of the petitioners is that merely on account of the inclusion of the name of the petitioners hotel in the aforesaid list their licence is not renewed. According to them, the inclusion of the name of their hotels as non-standard hotels, is a mistake as evidenced from Exts.P2 and P3 certificates. The petitioners allege that the Apex Court has discussed about nonstandard hotels/unclassified hotels and directed to take action on the non-standard hotels. The Government have issued GO (MS) No.56/2014/TD dated 2.4.2014 deciding to renew the licenses of all hotels except 418 non-standard bar hotels mentioned in the judgment of the Apex Court. 6. The petitioners allege that the petitioners' hotels are three star classified hotels and it is specifically stated in the judgment of the Apex Court that non standard hotels are hotels WP(C).10280, 10292 and 10024/ 2014 **-:4:-** below two star classification. It is noted that the denial of benefit to renew their licence amounts to discrimination and violative of Article 14 of the Constitution. It is with this background, the petitioners have approached this Court. 7. The respondent State has filed counter affidavit in all the cases raising the following contentions: It is stated that as per G.O(MS) No.187/2011/TD. dated 8.11.2011, the Government decided to dispense with the practice of granting FL-3 licences to hotels having three star classification, and accordingly necessary amendment in the Foreign Liquor Rules was made to the above effect vide G.O(P) No.192/2011/TD. dated 9.12.2011. Further in the Abkari Policy for the year 2011-012 announced vide G.O(MS) No.107/ 2011/TD. dated 17.8.2011, it was decided to fix the distance between two FL-3 licenses while issuing new licenses to hotels in Panchayat areas as three kilometres, and that in Municipality/ Corporation areas as one kilometre, and notification to that effect was issued vide G.O(P) No.48/2012/TD. dated 27.3.2012 WP(C).10280, 10292 and 10024/ 2014 **-:5:-** (SRO No.202/2012 dated 27.03.2012) amending the Foreign Liquor Rules. Being aggrieved by the said changes in the rules, several writ petitions and writ appeals were filed before this Court. This Court in its judgment dated 27.7.2012 in W.A No.470 of 2012 and other cases Surendradas V. State of Kerala [2012 (3) KHC 693 (DB)] set aside the above amendments being unconstitutional with the direction to consider and grant FL 3 licence based on unamended rules. Aggrieved by the said judgment, Government filed SLP(C) No.26241-26243/2012 before the Apex Court. The Apex Court during the course of hearing, directed the Government to submit the list of 418 unclassified hotels which was mentioned in the CAG report. Accordingly, the first respondent filed an affidavit before this Court. Among the 418 hotels, some of the hotels have already seized functioning. The above facts were submitted before the Apex Court. It was further submitted that the Government have not taken any policy decision that the minimum standard of the WP(C).10280, 10292 and 10024/ 2014 **-:6:-** hotel shall 3 star for granting FL-3 licences. The Government have decided to renew the FL-3 licenses provisionally except 418 hotels mentioned in the judgment of the Supreme Court as an ad-interim arrangement. The issue of renewal of the FL-3 licenses of the bar hotels mentioned in the Supreme Court order is deferred till the consideration of the recommendations of the Secretary (Taxes) on the report of the One Man Commission by the Government. The Secretary to Government, Taxes Department has already submitted his report and Government is actively considering the report and a decision would be taken very soon. It is stated that the Government have not decided not to renew any licenses till date. The Government have only deferred the decision on the renewal of hotels mentioned in the judgment of the Apex Court. 8. I have learned the learned Senior Counsel for the petitioners and the learned Senior Government Pleader in the matter. WP(C).10280, 10292 and 10024/ 2014 **-:7:-** 9. It is an admitted fact that the petitioners are conducting FL-3 licence for several years. However at the time of preparation of the list during 2006-07 since the hotels were not having classification from the India Tourism Department, they were not included in the list of 65 (353+65) hotels upgraded to 2 star, 3 star ad 4 star. The hotel of the petitioners are having 3 star classification as evident from Ext.P2 certificate produced in this writ petitions. Since all the three star hotels existing on 31.3.2014 and also nearly 80 hotels of which the validity of the classification expired are renewed, the petitioners are also entitled to get the renewal; so submitted the learned Senior Counsel for the petitioners. 10. The stand taken by the Government is that the petitioners' hotels were included in the list submitted before the Government and, therefore, they are treated as unclassified hotels. In this context, it is worthwhile to examine the judgment of the Apex Court in Surendra Das's case (cited supra) wherein it was held as follows: WP(C).10280, 10292 and 10024/ 2014 **-:8:-** “We must as well note that the two star and three star hotels stand on a different footing as against the hotels with four star and higher classification under the tourism policy of the Government of India. It is relevant to note that the Ministry of Tourism (H&R Division) of the Government of India has issued the amended guidelines for classification/re-classification of hotels on 28.6.2012. The classification of the hotels into star categories and heritage categories is done thereunder, and it is a voluntary scheme. Annexure-2 contains the provisions concerning classification/re-classification of operation hotels . Para 8(f) thereof provides as follows; “8(f). Bar License (necessary for four star, five star, five star deluxe, heritage classic & heritage grand categories). Wherever bar license is prohibited for a hotel as per local law, the bar will not be mandatory and wherever bar is allowed as per local laws, then the hotel will have to obtain bar license first and then apply for classification to the Ministry of Tourism.” This being the position, it is not necessary for a three star hotel to have a bar licence. In face as can be seen the para 8(f) above also states that if a local law prohibits the issuance of a bar licence to WP(C).10280, 10292 and 10024/ 2014 **-:9:-** 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 FL-3 licence. 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 concerned Comptroller and Auditor General which is a constitutional functionary, and who has made the report on receiving the necessary information from the State Government. This above referred paragraph 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 to 418 bar hotels, i.e., 61 per cent of the total bar hotels in WP(C).10280, 10292 and 10024/ 2014 **-:10:-** the State even though they were not eligible for the FL3 licenses per the Rules. We noticed that the Government first allowed time upto 30 June 1992 for those licensees who had attained the prescribed two star standards to attain the prescribed standard and subsequently extended the period. During the review period, we noticed that the Excise Commissioner submitted his proposals for the Abkari policy for the year 2007-08 vide letter dated 11 January 2007 which did not include the proposal for regularisation of 418 non standard bar hotels, the list of which was sent to the Government in January 2006. However, based on a discussion with the Hon'ble Minister for Labour and Excise on 22.1.2007, the Excise Commissioner sent a revised proposal on 23.1.2007, including the proposal that “Bar Licenses (FL3 licences) which have not attained two star classification and functioning at present may be regularised”. After we pointed out the matter, the Government stated (November 2011) that there are certain bar hotels functioning with standard below two star specifications. As these hotels were functioning for long periods, they were regularised based on Abkari Policy 2007-08. The point is not WP(C).10280, 10292 and 10024/ 2014 **-:11:-** acceptable for the reason that as per Rules the licences are issued each year and the standard for granting licence are still three star standard. We noticed that the Government, 15 years after extending time limit for the first time, again extended (12 March 2007) the time limit upto 31 March 2007 and stated that failure to comply with the standards would lead to cancellation of licenses. However, on the very next day, i.e. 13 March 2007 the Government added a proviso to R. 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. We noticed that the field officers of the Department had reported violation of licence conditions like unhygienic conditions, lack of facilities, non adherence of the time schedule, selling on dry days, opening more than one counter, etc., in these bar hotels. However, no action was taken by the Department on these reports. The Excise Commissioner sent a letter (January 2011) to the Government WP(C).10280, 10292 and 10024/ 2014 **-:12:-** 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 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 were 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 not taken a firm stand to ensure that only hotels of a minimum standard are issued FL3 licenses. Further, we opine that the Government has seriously compromised public safety by (a) ## WP(C).10280, 10292 and 10024/ 2014 **-:13:-** regularising 418 unclassified bars, though they were not able to attain the minimum standards despite repeated extension of time and (b) by turning a blind eye towards the various complaints against these unclassified bars. On this being pointed out in audit the Department stated (June 2011) that the Government is the competent authority to issue orders allowing relaxation, if any, for the functioning of FL3 licensees/bar hotels.” 11. It is clear from the above judgment that non standard hotels are hotels below two star classification. As it is an admitted fact that the petitioners are having three star classification and as the Government as per the Government Order referred to above in the preceding paragraph have decided to renew the hotels except the 418 non standard hotels mentioned in the judgment of the Apex Court that the non renewal of the licence in the name hotels of the petitioners are discriminatory and are violative under Article 14 of the Constitution. Therefore, this Court is of the definite view that the petitioners are entitled to get the reliefs sought for. WP(C).10280, 10292 and 10024/ 2014 **-:14:-** In the result, the writ petitions are allowed. It is hereby declared that the petitioners are entitled to get renewal of Ext.P1 FL-3 licence for the year 2014-15 since the petitioners' hotels are three star classified hotels as evident from Ext.P2 certificate. The respondents are directed to receive the application from the petitioners for renewal of Ext.P1 licence for the year 2014-15 along with the proportionate licence fee and pass orders renewing the licence, within a period of two weeks from the date of receipt of a copy of this judgment. However, it is made clear that this decision shall be subject to any policy decision taken by the Government in the matter which gains judicial approval. Sd/- A.V.RAMAKRISHNA PILLAI JUDGE krj