VMGR Hotels & Resorts (P) Ltd. v. State of Kerala and Others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT:** **THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR** **FRIDAY, THE 25TH DAY OF NOVEMBER 2016/4TH AGRAHAYANA, 1938** ## **WP(C).No. 18873 of 2016 (H)** **----------------------------** ## **PETITIONER :** **----------------------** **VMGR HOTELS & RESORTS (P) LTD., (HOST INTERNATIONAL), BYE PASS ROAD, VALLANGHY, NENMARA, PALAKKAD-678 508, REPRESENTED BY ITS MANAGING DIRECTOR, BINOY JOSEPH.** **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-695 033.** **3. THE DEPUTY COMMISSIONER OF EXCISE, PALAKKAD-678 001.** **R1 TO R3 BY GOVERNMENT PLEADER SMT. MABLE C. KURIAN** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 25-11-2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:** **sts** ## **WP(C).No. 18873 of 2016 (H) -----------------------------------------** ## **APPENDIX** ## **PETITIONER(S)' EXHIBITS** ## **---------------------------------------** - **P1 PHOTOCOPY OF THE ORDER NO. XC6-E-1956/2016 DATED 1-4-2016 PASSED BY THE 2ND RESPONDENT.** - **P2 PHOTOCOPY OF THE ORDER NO. P6-1957/2016 DATED 2-4-2016 PASSED BY THE 3RD RESPONDENT.** - **P3 PHOTOCOPY OF THE LETTER DATED 18-4-2016 SENT TO THE 2ND RESPONDENT.** - **P4 PHOTOCOPY OF THE SHOW CAUSE NOTICE NO. XC6-E-1956 DATED 1-4-2016 ISSUED BY THE 2ND RESPONDENT.** - **P5 PHOTOCOPY OF THE REPLY DATED 14-5-2016 SENT TO THE 2ND RESPONDENT.** - **P6 PHOTOCOPY OF THE FL-11 LICENSE NO. P-49 ISSUED BY THE 3RD RESPONDENT, DATED 4-5-2015.** ## **RESPONDENT(S)' EXHIBITS:** ## **NIL** **-----------------------------------------** ## **/TRUE COPY/** ## **P.A.TO JUDGE** **sts** ## **P.B. SURESH KUMAR, J.** ## **--------------------------------------------------** ## **W.P.(C) No.18873 of 2016** **-------------------------------------------------Dated this the 25[th] day of November, 2016** ## **JUDGMENT** The petitioner is a company which owns a hotel at Vallanghy. The petitioner holds a licence in Form No.FL11 of the Foreign Liquor Rules ('the Rules') framed under the Abkari Act ('the Act') for conducting a beer and wine parlour in its hotel. Ext.P6 is the licence issued to the petitioner under the Rules for the period 2015-2016. Ext.P6 licence was issued to the petitioner in the joint names of its then Managing Director K.Mohankumar and its Director Binoy Joseph. The Managing Director of the petitioner K.Mohankumar died on 17.11.2015. Consequently, Binoy Joseph, the Director of the petitioner, requested the competent authority to issue the licence in W.P.(C) No.18873 of 2016 -2- his name on behalf of the petitioner. On the said application, the second respondent, as per Ext.P1, directed that the licence of the petitioner be issued provisionally in the name of Binoy Joseph for a period of three months on condition that the petitioner shall pay a sum of Rs.2,00,000/- towards the fee payable under Rule 19(v) of the Rules and Rs.3,00,000/- towards fine under Section 67 (2) of the Act. Pursuant to Ext.P1 order, the licence of the petitioner was renewed for a period of three months on payment of Rs.5,00,000/- as directed in Ext.P1 order. According to the petitioner, since the company is the licensee and since the Managing Director and the Director of the company referred to above were only the representatives of the company to be shown in the licence issued to the company under the Rules, there was no justification at all for the second respondent in passing an order in the nature of Ext.P1. Consequently, the petitioner preferred Ext.P3 representation before the W.P.(C) No.18873 of 2016 -3- second respondent seeking orders to refund the amount paid pursuant to Ext.P1 order. In Ext.P3 representation, the petitioner has stated that there was no reconstitution of the Board of Directors of the petitioner company consequent on the death of its Managing Director. While Ext.P3 representation was pending, Ext.P4 notice was issued by the second respondent directing the petitioner to show cause why the licence granted to the petitioner under the Rules shall not be cancelled for having not informed the competent authority the death of the Managing Director of the company. The petitioner sent Ext.P5 reply to Ext.P4 show cause notice and thereafter approached this Court in this writ petition seeking orders to quash Ext.P1 order to the extent it directs payment of Rs.5,00,000/-. The petitioner also seeks a declaration that they are entitled to be issued the licence granted to them in the name of their Director Binoy Joseph. The petitioner further seeks direction to the respondents to refund the amount W.P.(C) No.18873 of 2016 -4- paid pursuant to Ext.P1 order. 2. It is seen that on 20.06.2016, this Court directed the respondents 2 and 3 to renew/extend the licence of the petitioner for the year 2016-'17. 3. A statement has been filed on behalf of the second respondent in this matter reiterating the stand of the Department as stated in Ext.P1 order. 4. Heard the learned counsel for the petitioner as also the learned Government Pleader. 5. It is beyond dispute that the licence referred to in Ext.P1 order is a licence issued to the petitioner and that the erstwhile Managing Director of the petitioner, Mohankumar, and its Director, Binoy Joseph, were only the representatives of the petitioner to be shown in the licence issued to the petitioner under the Rules. The learned Government Pleader, relying on Rule 19 of the Rules, contended that the petitioner was obliged to inform the competent authority under the Rules, the death of W.P.(C) No.18873 of 2016 -5- Mohankumar and should have removed his name from the licence by remitting the fees payable under Rule 19(v) of the Rules. Rule 19 of the Rules reads thus: “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). (iv) Change of name of licensee may be allowed on payment of Rs.2 Lakhs (rupees two lakhs only). 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 the constitution/reconstitution of a partnership or Director Board of a company of a hotel which does not have two star classification will be allowed on payment of Rs.2,00,000/(Rupees two lakhs) for each partner/director opted out of the partnership or Director Board of the company and on payment of Rs.20,00,000/- (Rupees twenty lakhs) for each partner/director inducted into the partnership or Director Board of the company, as the case may be. Provided also that change of name of licensee of a hotel which do not have two star or above classification W.P.(C) No.18873 of 2016 -6- shall be allowed on payment of Rs.20,00,000/- (Rupees twenty lakhs only). (v) Notwithstanding anything contained in this rule, in the case of death of a licensee 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 licensee, 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. 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, FL 3 licences have been obtained.” Rule 19(i) of the Rules prohibits transfer of a licence issued under the Rules in all forms without the previous sanction of the Excise Commissioner. Rule 19(ii) of the Rules clarifies that reconstitution of the Directors in a company resulting in change of ownership which owns/manages or operates any licence issued under the Rules shall be deemed to be transfer of licence. Rule 19(iii) of the Rules provides that reconstitution of Directors of a company may be allowed on payment of Rs.1,00,000/-. Rule 19(iv) of the Rules provides that the change of name of licensee W.P.(C) No.18873 of 2016 -7- may be allowed on payment of Rs.2,00,000/-. Rule 19(v) of the Rules provides that notwithstanding anything contained in any other Rules, in the case of death of a licensee of a proprietorship concern or partner or a Director of a partnership firm or a Director of a company that holds an FL-3 licence, the change of name of licensee, the reconstitution of partnership, or Board of Directors of a company, as the case may be, will be allowed on payment of Rs.2,00,000/-. It is seen that it is relying on the expression 'the change of name of licensee' contained in Rule 19(v) of the Rules that the petitioner has been directed to pay a sum of Rs.2,00,000/- on the ground that the death of Mohankumar necessitates change of name of licensee in the licence issued to the petitioner. As noted above, the licensee in this case is the company and Mohankumar was only a representative of the company. Further, the respondents have no case that there was reconstitution of the Board of Directors of the company on W.P.(C) No.18873 of 2016 -8- the death of Mohankumar. In the circumstances, according to me, there is no justification in directing the petitioner to pay a sum of Rs.2,00,000/-. Similar view has been taken by this Court in **Cochin Gymkhana Club** v. **State of Kerala and Others** (2015 (4) KLJ 575). It was a case involving the change of name of the Secretary of the club in whose name a licence was issued to the club. 6. Coming to the fine imposed on the petitioner as per Ext.P1 order, it is seen that Section 67(2) of the Act was invoked by the Excise Commissioner for the said purpose. Section 67(2) of the Act reads thus: “67. Power to impose fine: (1) The Commissioner shall be competent to impose such fine as may be prescribed in the rules, on any person holding a licence or permit issued under this Act, for contravention of any rule made under this Act: Provided that no order imposing any fine under this section shall be made without giving the person an opportunity of being heard. (2) The Commissioner may impose a fine of Rs.3,00,000/- (Rupees Three lakhs only) each on any -9- W.P.(C) No.18873 of 2016 person or persons holding a licence or permit under this Act for the violation by way of reconstitution, alteration or modification without the permission of the Commissioner of any deed on the strength of which any licence is granted. (3) Where a partnership firm or a company having a hotel (restaurant) holding a licence under this Act has, without the previous permission of the Commissioner, reconstituted, altered or modified any deed constituting such partnership or Board of Directors of the company, on the strength of which such licence is granted, the Commissioner may, on payment of the fine imposed under sub-section (2) and on an application from such licensee and subject to the other provisions of this Act and the rules made thereunder, regularise such re-constitution, alteration or modification after accepting such fee as may be prescribed by rules.” Section 67(1) of the Act provides that the Commissioner shall be competent to impose such fine as may be prescribed in the Rules, on any person holding a licence issued under the Act, for contravention of any rule made under the Act. The proviso to Section 67(1) of the Act clarifies that no order imposing any fine under the subsection shall be made without giving the person an opportunity of being heard. Section 67(2) of the Act provides that the Commissioner may impose a fine of W.P.(C) No.18873 of 2016 -10- Rs.3,00,000/- (Rupees Three lakhs only) on any person holding a licence under this Act for the violation by way of reconstitution, alteration or modification without the permission of the Commissioner of any deed on the strength of which any licence is granted. As far as the present case is concerned, the only allegation against the petitioner is that they have not informed the competent authority the death of their Managing Director who is one among their representatives in the licence issued to them under the Rules. Going by the provisions contained in Section 67(2) of the Act, the first respondent has no power to impose fine on the aforesaid ground, for, fine is provided only for reconstitution without prior permission of the competent authority. Further, if at all the petitioner is liable to pay fine as provided for under the said Section, there should have been a separate proceedings for the same and notice should have been issued to the petitioner before imposing fine. The direction to the petitioner in W.P.(C) No.18873 of 2016 -11- Ext.P1 order to pay a fine of Rs.3,00,000/- is also, therefore, unsustainable. In the result, Ext.P1 order, to the extent it directs the petitioner to pay Rs.2,00,000/- under Rule 19 (v) of the Rules and Rs.3,00,000/- under Section 67(2), of the Act, is quashed. It is declared that the petitioner was entitled to get the licence renewed on payment of licence fee for the period 2016-'17. The amount collected from the petitioner pursuant to Ext.P1 shall be adjusted against the future licence fee payable by the petitioner. Sd/- **P.B. SURESH KUMAR JUDGE** bpr