Kerala High Court
B. Surendra Das vs The State Of Kerala on 7 March, 2012
Author: K.Vinod Chandran
Bench: C.N.Ramachandran Nair, K.Vinod Chandran
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT:
THE HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR
&
THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN
FRIDAY, THE 27TH DAY OF JULY 2012/5TH SRAVANA 1934
WA.No. 470 of 2012 ()
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AGAINST THE ORDER/JUDGMENT IN WPC.5650/2012 DATED 07-03-2012
......
APPELLANT:PETITIONER:
----------------------------------------
B. SURENDRA DAS,
S/O.LATE BHANU PANICKER, `SREE VISAKH', AMBALATHARA
POONTHURA P.O., THIRUVANANTHAPURAM.
BY ADV. SRI.K.B.PRADEEP
RESPONDENT(S):RESPONDENTS:
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1. THE STATE OF KERALA,
REPRESENTED BY THE SECRETARY (TAXES), SECRETARIAT
THIRUVANANTHAPURAM-695 001.
2. THE COMMISSIONER OF EXCISE,
DEPARTMENT OF EXCISE, GOVERNMENT OF KERALA,
THIRUVANANTHAPURAM-695 001.
R1 & R2 BY ADDL.ADVOCATE GENERAL SRI. P.C.IYPE
BY SR.GOVERNMENT PLEADER SRI. GEORGE MECHERIL
THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 29/06/2012
ALONG WITH WPC.NO. 1652/2012 AND CONNECTED CASES,THE
COURT ON 27/07/2012 DELIVERED THE FOLLOWING:
Kss
W.A.NO.470/2012
APPENDIX
PETITIONER'S ANNEXURE:
ANNEX.A1: COPY OF THE LETTER DATED 14/10/2011 RECOMMENDING GRANT
OF LICENCE TO THE PETITIONER.
RESPONDENT'S ANNEXURES: N I L
/TRUE COPY/
P.A.TO JUDGE
Kss
C.R.
C.N.Ramachandran Nair &
K.Vinod Chandran, JJ.
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W.A.Nos.470/2012, 670/2012 & 745/2012 &
W.P.(C).Nos.188/2012-W, 1652/2012-F,
2529/2012-M, 2676/2012-H, 4210/2012-A,
5008/2012-A, 5212/2012-B, 5311/2012-L,
6508/2012-K, 6964/2012-U, 6975/2012-V,
7363/2012-U, 7923/2012-M, 8152/2012-T,
8525/2012-M, 8840/2012-D, 8878/2012-H,
9518/2012-L, 11555/2012-T & 14225/2012-C
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Dated this the 27th day of July, 2012.
JUDGMENT
Ramachandran Nair, J.
The appellants in the Writ Appeals and the petitioners in the Writ Petitions are all star hotels with categorization above "Three star" given by the Ministry of Tourism, Government of India. All star hotels above three star classification were entitled to get bar licence for retail sale of liquor in the hotels under Rule 13(3) of the Foreign Liquor Rules (hereinafter referred to as "the Rules" for short) prescribed under the Kerala Abkari Act (hereinafter referred to as "the Act" for short). However, an amendment was introduced in the year 2011 by SRO No.779/2011 dated 09/12/2011 [GO(P) No.192/2011/TD] deleting "three star" from the category of hotels entitled for bar licence under the above Rules. Later through another amendment by SRO No.202/2012 dated 27-03-2012 [GO(P) No.48/2012/TD] another prohibition was introduced by inserting W.A.No.470/2012 & connected cases -2- sub-rule (3E) to Rule 13 whereunder even four star and above category hotels constructed within a radius of 3 Kms. in Grama Panchayats and 1 Km. in Municipal/Corporation limits, from another hotel/Restaurant with FL-3 licence, were declared disentitled for the grant of new FL-3 licence.
2. The appellants/petitioners contend that they have in the course of last 1-2 years constructed star hotels spending more than Rs.10 crores for each Hotel, mostly with borrowed funds obtained from public sector financial institutions like Kerala Financial Corporation, Kerala State Industrial Development Corporation and from Nationalized Banks, and all these three star and above category hotels cannot be run viably without Bar licence. The Hotels of all appellants/petitioners are all having classification of "Three Star" and above. The petitioners in W.P.(C).Nos.8878 of 2012, 9518 of 2012, 8152 of 2012 and 8840 of 2012 have "Four Star" classification and the petitioners in W.P.(C).Nos.11555 of 2012 and 14225 of 2012 respectively have "Five Star" or "Heritage" classification. While the 4-Star and above and Heritage classified hotels are challenging the prohibition through distance Rule introduced by sub-rule (3E) to Rule 13, the 3-Star hotels are challenging the general prohibition W.A.No.470/2012 & connected cases -3- introduced against grant of FL-3 licence to such Hotels which is done by deleting "3-Star" from Sub Rule (3) of Rule 13 of the Rules. All the appellants/petitioners are challenging the above amendments as arbitrary, discriminatory and violative of Article 14 of the Constitution and against the very objective of Rule 13(3) which is tourism promotion in the State. Besides this they are also challenging the 4th, 6th and 7th proviso under which existing FL-3 licensees are entitled to regularisation and renewal of Bar licence every year, though most of these licensees are only Restaurants and Hotels which do not even have Star classification which according to the appellants/petitioners is plain discrimination violative of Article 14 of the Constitution.
3. We have heard Senior counsel Shri.C.C.Thomas, Shri.K.Ramakumar, Shri.P.Ravindran and Shri.S.Sreekumar, and Advocates Shri.George Poonthottam and Shri.K.B.Pradeep, appearing for the appellants/petitioners, Shri.P.C.Iype, learned Additional Advocate General and Shri.George Mecheril, learned Senior Government Pleader appearing for the State and the official respondents; and also Senior counsel Shri.K.Gopalakrishna Kurup, and Advocates Shri.Sudhi Vasudevan, Shri.N.Reghuraj, Shri. Babu Karukappadath and Smt.Preetha C.G., appearing for the additional W.A.No.470/2012 & connected cases -4- respondents impleaded in the cases.
4. At the outset the learned Additional Advocate General brought to our notice the decision of the Supreme Court in Kuldeep Singh Vs Govt. of NCT of Delhi, reported in (2006) 5 SCC 702 wherein the Supreme Court held that the right to carry on business in liquor is not a fundamental right and that the policy decisions of the Government in abkari matters, introduced through amendments should not be easily interfered with unless the amendment is motivated by mala fides, arbitrariness and discrimination. Another principle settled though the above decision of the Supreme Court brought to our notice is that investments made by parties in hotels should not weigh with the Court to direct grant of bar licence in violation of Government Policy. To further fortify the stand, the learned Additional Advocate General took us through the decision in Ugar Sugar Works Ltd. v. Delhi Administration [(2001) 3 SCC 635], which held that mere business interests of a party cannot justify interference in the policy matters if the same is not touched by mala fides and is not unfair, unreasonable or arbitrary. Reliance was also placed on the decision in State of M.P. v. Narmada Bachao Andolan [(2011) 7 SCC 639], by which the Hon'ble Supreme Court W.A.No.470/2012 & connected cases -5- held that the High Court cannot stike down a policy decision merely because another decision would have been fairer, more logical or wiser.
5. The learned counsel for the appellants/petitioners, however have brought to our notice the Constitution Bench decision of the Supreme Court in Khoday Distilleries Ltd. & Ors Vs State of Karnataka [(1995) 1 SCC 574] wherein the Supreme Court has clearly stated that even though right to carry on liquor business is not a fundamental right, once it is permitted in the State, the State has to make Rules and permit the business without any arbitrariness or discrimination and in conformity with Article 14 of the Constitution of India. Keeping the principles laid down by the Supreme Court in mind, we proceed to consider the challenge raised in these cases.
6. Since we have to consider the cases with reference to the scope and meaning of the relevant Rules, we extract hereunder Rule 13(3) and the related sub-rules of the Rules for easy reference:-
"13. Licences for possession, use or sale :- Licences for the possession and sale of foreign liquor or for possession or use of foreign liquor shall be of the following descriptions and in the forms appended hereto.
xxx xxx xxx (3) Foreign Liquor 3 Hotel (Restaurant) Licence :-
Licence in this form may be issued by the Excise W.A.No.470/2012 & connected cases -6- Commissioner under orders of Government, in the interest of promotion of tourism in the State, to hotels which have obtained three star1, four star, five star, five star deluxe, heritage, heritage grand or heritage classic classification from Ministry of Tourism, Government of India, where the privilege of sale of foreign liquor in such hotels have been purchased on payment of an annual rental of Rs.22,00,000 (Rupees twenty two lakhs only). But no such licence shall be issued to hotels which are located within 200 (two hundred) metres from an educational institution, temple, church, mosque or burial ground. Hotels other than those in the private sector having four star, five star, five star deluxe classification will be exempted from the distance restrictions in the interest of promotion of tourism in the State. In the case of hotels in the private sector of the above categories and hotels having heritage, heritage grand and heritage classic classification issued by Ministry of Tourism, Government of India, no such licence shall be issued if located within 50 (fifty) metres from any educational institution, temple, church, mosque, burial ground or scheduled caste/scheduled tribe colony. The applicant shall produce from the Abkari Workers Welfare Fund Inspector a certificate to the effect that he has remitted before the date of application for the licence/ renewal of licence, the arrears of contributions, if any, payable up to the 31st of December of the preceding year.
The existing licensees who do not maintain two star standards will be allowed time up to 31st March 2007 to upgrade their standards to two star. Their licence will be renewed till that date. Failure to upgrade the standard of those hotels would lead to cancellation of licence and forfeiture of rental paid by them. licensees shall have no claim for compensation. The applicant shall produce from the Abkari Worker's Welfare Fund Inspector a Certificate to the effect that he has remitted before the date of application for the licence / renewal of licence, the arrears of contributions, if any, payable up to 31st day of December preceding year.
The question whether a hotel or restaurant conforms to the standard of Two Star Hotel shall be determined in accordance with the specifications for W.A.No.470/2012 & connected cases -7- classification of Star Hotels issued by the Department of Tourism and in case of doubt or dispute, the decision of the Excise Commissioner shall be final.
The cost of liquor shall be billed along with the cost of meals. The cost of liquor shall be shown separately in the bill and the duplicate copies thereof shall be retained for inspection by the Officers of the Excise Department.
The licensee shall purchase his supplies of Foreign Liquor only from such FL9 licensees in the State as may be permitted by the Excise Commissioner.
xxx xxx xxx Provided also that such bar licences, having disputes on distance rules and shifting outside Municipal Corporation area, including those of Approved Restaurants, existing as on 1st April, 2004 shall be regularised.
xxx xxx xxx Provided further that all existing licences not having the above classification and are functional as on 31st March, 2007 shall be regularised.
Provided also that all FL-3 licences not having the requisite star classification and are functional during 2009-2010 shall be regularised.
xxx xxx xxx (3B) No liquor shall be sold under FL-3 licences for removal outside the hotel to any one including residents of the hotel:
Provided that the liquor may be sold and served to residents of the hotels in the rooms where they reside or in the restaurants wherein they partake food, if such hotels have restaurants exclusively for the use of families and others where no liquor shall be served:
Provided further that the holder of an FL3 licence may serve liquor along with meals by the side of swimming pools and in the lawns and roof gardens of the W.A.No.470/2012 & connected cases -8- hotel if he obtains a special permit for the purpose from the Commissioner of Excise, on payment of additional annual rental of [Rs.50,000 (Rupees fifty thousand only)] Provided also that for serving liquor at restaurants to persons other than residents, the licensee shall pay an additional annual fee of [Rs.25,000 (Rupees Twenty five thousand only)] xxx xxx xxx (3E)2 Notwithstanding anything contained in these rules, no new FL3 licence shall be granted to hotels which are located within a radius of three kilometers in Grama Panchayat and one kilometer in Municipal Corporation/City Corporation, from another hotel having an FL3 licence granted under this rule".
1 Deleted by impugned Amendment of 2011.
2 Introduced by impugned Amendment of 2012.
7. Before proceeding to consider the case of the appellants/petitioners for their entitlement, which are star hotels with three star, four star and five star or Heritage classification, we have to notice the nature of liquor business permitted in Kerala and the actual network of business presently going on, as pointed out by the counsel on both sides. In Kerala, the wholesale business in foreign liquor is the monopoly business of a fully owned Government Company by name Kerala State Beverages (Manufacturing and Marketing) Corporation Limited, which Corporation is the only source from which liquor can be purchased by any retailer including every bar hotel in the State. Besides the monopoly wholesale business W.A.No.470/2012 & connected cases -9- carried on by this Corporation, the Government under Rule 13(1) of the Rules has issued licence to this Corporation for retail sale of liquor in bottles through their various outlets in the State. As of today, this Corporation alone has 384 retail depots selling liquor in bottles in the State. Apart from this Corporation, the Government has permitted retail sales through few outlets of other two Government controlled Corporations, which are the Kerala State Civil Supplies Corporation Limited and Kerala State Co-operative Consumer Marketing Federation Limited. These Government Companies are the sole retail sellers of liquor in bottles. All the three Government Companies with FL-1 licence issued under Rule 13(1) of the Rules are together running around 400 shops in the State. Beer-Wine Parlour licences are issued to several outlets of another Government company namely, the Kerala Tourism Development Corporation.
8. Besides the retail sale of foreign liquor, wine, etc. in bottles, the Government has issued FL-3 bar licence to 708 hotels and restaurants in the State as on 30/11/2011. These bar licences are issued mostly to restaurants and to large number of hotels without any star classification. Bar licence in Form No.FL-3 is issued every year and is renewed on an year to year basis on payment of W.A.No.470/2012 & connected cases -10- annual licence fee of Rs.22 lakhs. Under Rule 14, all licences issued every financial year on payment of annual fee shall expire at the end of the financial year. In fact among 708 licences issued, three star hotels account for only around 200, and four star and five star and heritage hotels account for only around 50 and the entire balance of above 450 hotels and restaurants which enjoy bar licence in Form FL-3 for retail sale of liquor are just restaurants or ordinary hotels, all of which under the amended Rules are entitled to regular renewal of licence. So far as volume and value wise sale of liquor is concerned, it is to be seen that sales volume-wise and turnover-wise are going up on a steady basis in geometric progression. In the years 2009-10 and 2010-2011, quantum jump in the gross sale of the State Government Corporation, viz., Beverages Corporation Limited alone is Rs.1000 crores. For the next year again, there is substantial increase in turnover by around Rs.500 crores. The State Government's annual collection of sales tax, excise duty and bar licence fee accounts for around Rs.7000 crores. In short, business is essentially controlled by the Government Corporation and the substantial beneficiaries are also the Government and the Corporation and Companies under it's control.
W.A.No.470/2012 & connected cases -11-
9. The history of the various amendments which gave rise to current litigation briefly is that, in 2007 amendments were brought to Rule 13(3), rephrasing the entire rule and permitting grant of FL-3 licence to only Hotel with three-Star and above classifications. Simultaneously, the 6th proviso was brought in, so as to continue renewal of licences to all existing licensees not having 3-Star or above classification, but who have been functional as on 31.3.2007. Similarly, when in 2011, the category "three-Star" was deleted from Rule 13 (3); 7th proviso was brought in, again permitting existing licensees not having the requisite star classification and functional in the previous year, i.e., 2009-10, to be regularized. As noticed above, the subsequent amendment introduced by sub-rule (3E) after sub-rule (3D) resulted in prohibition against grant of licences to any new Hotel with 4-Star and above classification within the radius of 3 Kms./1 Km. in the respective areas, from existing licensees. Hence, a Hotel having "four-Star" or above or with Heritage classification applying for FL-3 licence would be denied the same, if such Hotel is within the above prohibited distance from an FL-3 licence holder irrespective of whether such licensee is a Star Hotel or not.
10. The above is the background in which we are called W.A.No.470/2012 & connected cases -12- upon to consider the challenge raised by the appellants/petitioners against the disqualification introduced to 3-Star and above category Hotels from getting bar licence through the amendments made to the Rules, which are challenged by them on the ground that hasty decisions taken are mala fide and discriminatory and is only to promote and protect the monopoly business of the existing Government Companies and also other existing bar hotels and restaurants. We are conscious of the position that unconstitutionality, arbitrariness and discrimination are not to be easily inferred.
11. What we notice from the Rules is that the retail licence conceived under Rule 13(1) is FL-1 licence which is for sale of liquor in bottles in retail shops, which are run only by the fully owned Government Company, the Beverages Corporation and partly by Kerala State Civil Supplies Corporation Limited and also Kerala State Co-operative Consumer Marketing Federation Limited, both under the control of the Government. So far as bar licence under Rule 13(3) is concerned, we notice that the primary objective of giving bar licence is to promote tourism in the State. What is obvious in the first part of Rule 13(3) is that Government understands that star hotels and heritage hotels are major players in the tourism W.A.No.470/2012 & connected cases -13- industry. In fact on a plain reading of the said Rule, what is clear is that these star hotels and heritage hotels which have been issued classification by the Ministry of Tourism, Government of India are entitled to bar licence, essentially to promote tourism in the State. Tourism in India is mainly promoted for earning foreign exchange and it is to encourage the flow of foreign tourists to India, star hotels are given all incentives and benefits by both the Central and State Governments including Bar licence. The State Government obviously is well aware of the habits of the foreign tourists, particularly from the western world who consume alcohol and it is essentially to cater to the needs of the foreign tourists Bar Licence is given to Star Hotels.
12. In fact, State Government was granting bar licences as a matter of right to all star hotels with two star and above categorization. However, issuance of bar licence to two-star hotels was discontinued in the year 2007 and it can safely be inferred that Government felt that the requirement of tourists can be met by issuing bar licence to three star and above hotels. Even when such an amendment was introduced in 2007, 6th proviso was introduced to the said Rule only to ensure that two star hotels which were enjoying W.A.No.470/2012 & connected cases -14- bar licence should be regularized and they should be allowed to continue their licence. This obviously means that while the Government considered three star as the minimum requirement for a hotel to entitle them for bar licence for promotion of tourism in the State it also ensured that the existing licensees continued without any hindrance.
13. Tourism as an industry has engaged the attention of both Central and State Governments. The thrust for promotion of tourism industry is primarily due to the sizable amount of foreign exchange brought into the country. So far as the Tourism Policy of the State Government is concerned, the Government is making all efforts to promote tourism and in this regard it would not be out of place to refer to the budget speech made by the Finance Minister presenting the Finance Bill, 2012 in the Assembly, wherein he states the Policy of the Government on tourism as follows:-
"215. As per statistics for the year 2010, tourism sector has created around 12 lakh employment opportunities, earned an income of `17,000 crore, mobilized investments worth `1,000 crore and earned foreign currency worth `3,797 crore. A new tourism policy has, therefore, been formulated aimed at comprehensive development of Kerala. Emphasis has been given to infrastructural development of the tourism centres in Kerala in the 12th Plan. An amount of `15 crore is set apart for setting up a Tourism Promotion Board under public-private W.A.No.470/2012 & connected cases -15- partnership which will identify fresh tourism markets and utilize tourism possibilities at national and international level".
We also refer to the Liquor Policy of the State Government as expressed by the Finance Minister in his budget speech, 2012. which is as follows :-
"363. An awareness campaign aimed at 'Liquor Free Kerala' will be organised in school and college campuses. An amount of `1 crore is earmarked for this programme. An amount of `50 lakh will be provided to Excise Academy, Thrissur to arrange modern training facilities. An amount of `1 crore is set apart for the renovation of office buildings of the Excise Department".
From the liquor policy as stated above, it is very clear that the Government is aware that making liquor unavailable in certain star hotels is not going to achieve the objective of reduction in liquor consumption, which is possible only through awareness programmes and by way of educating people against liquor consumption.
14. What is abundantly clear from the Tourism policy is that the Government is earnestly making all efforts and fresh investments are made for promotion of tourism in the State. It is in this context, we have to consider whether the deletion of three star hotels from Rule 13(3) of the Rules vide SRO No.779/2011 [GO(P) W.A.No.470/2012 & connected cases -16- No.192/2011/TD dated 09/12/2011] is a decision, taken consistent with the Policy of the Government itself, and if not, whether this Court should infer mala fides, arbitrariness or discrimination against the appellants/ petitioners. As already stated above, from the 708 bar licences issued and renewed in the State as of now, around 450 account for restaurants and hotels, most of which do not have any classification and few having only two star classification. So far as three star hotels are concerned, around 200 hotels are issued bar licence and such licences are renewed on yearly basis. In this context, what we have to conclude is that the Government does not want to change their Policy of renewal of licences on an year to year basis even though while changing policy Government is entitled to restrict or deny renewal of licence for existing non-star and star hotels up to three star classification. On the other hand, according to the petitioners, through amendments discrimination is perfected by regularising licence to all and sundry existing Restaurants and Hotels and at the same time new three star and above class Hotels are disabled from getting FL-3 licence.
15. The Policy change to deny bar licence to "Three-star"
hotels has to be considered with reference to the objective covered W.A.No.470/2012 & connected cases -17- by the Policy. It may be noticed that the last Government declared the Abkari Policy vide G.O.M.S. 107/11 dated 17.8.2011 produced as Ext.P5 in W.P.(C) No.6964/2012 stating that all hotels with three star facility will be issued licence up to 31/3/2012. However, abruptly, the new Government changed the Policy introducing prohibition against new 3-star hotels from getting bar licence including those who have completed construction and obtained star classification before 31/3/2012. Most of the appellants/petitioners would get the licence had the Policy originally announced was continued. In this context, learned Additional Advocate General argued in support of the Policy introduced through the amendment to the Rules by stating that the objective is to reduce consumption of alcohol in the State and the ultimate objective of the Government is to achieve the objective of Article 47 of the Constitution of India i.e. to bring total prohibition in the State. It is worthwhile to refer to Article 47 of the Constitution of India, which is as follows:-
"47. Duty of the State to raise the level of nutrition and the standard of living and to improve public health.- The State shall regard the raising of the level of nutrition and the standard of living of its people and the improvement of public health as among its primary duties and in particular, the State shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health."
W.A.No.470/2012 & connected cases -18-
16. While the Hoteliers on the respondents' side are for upholding the provisos for enjoying the continued benefits of renewal of their licences by way of regularization, various counsel appearing for the anti-liquor lobby, both individuals and NGOs. on the respondents' side canvas for the goal of ultimate prohibition as provided under Article 47 of the Constitution of India and supported and welcomed the amendments as a healthy step towards the said direction. We have to now examine whether at least one step could be advanced by the State towards reduction in consumption of alcohol by denying bar licence to three star and above Hotels.
17. Learned counsel for the appellants/petitioners strongly opposed the projected motive of the Government by stating that the objective cannot be achieved by disentitling Star Hotels from getting Bar Licence and the actual objective is to protect the monopoly business carried on by the Government Companies and preserve the business of the existing bars in restaurants and hotels most of which do not have any star classification and those who have star classification do not account for even 30% of the total licences issued. The petitioners contend that both the amendments have absolutely no nexus with the object of Article 47 of the Constitution of W.A.No.470/2012 & connected cases -19- India. Article 47 aims at total prohibition of the consumption of intoxicating drinks and drugs injurious to health, except for medicinal purposes. It is the State's endeavor to this ultimate end that has been propounded in Part IV of the Constitution. On the strength of the facts and figures, the petitioners highlight the increasing sale of liquor as also the multiplying revenue in the successive years obtained by the State in the Abkari business. The petitioners contend that the endeavor propounded by Article 47 is totally absent in the State action as is revealed by the Abkari policy in the present year as also the previous years. Such endeavor being totally absent, it is the contention, that the present amendment as also the various provisos results in only excluding similarly situated persons and vanquishing the minimal competition. The State already having monopoly of wholesale sale of liquor within the State is attempting to confine the retail sales too to itself and the existing hotels and restaurants without any classification are also allowed to retain the licences. We have no doubt in our mind that if the impugned amendments achieve or at least are capable of achieving the objective, that is, to reduce consumption of liquor by people in the State, this court should not interfere with the amendments. It is only commonsense, argues the W.A.No.470/2012 & connected cases -20- Counsel for petitioners, that no local man goes to stay in expensive three star hotels, which is intended to accommodate rich tourists both from India and abroad. Therefore, consumption cannot be reduced by denying liquor availability in Star Hotels above Three Star where the customers are not local people.
18. We have to, therefore, look at whether the objective of reduction in consumption and ultimately of Article 47 could be achieved with the amendment or whether the amendment will ultimately undermine the very objective of Rule 13(3) which is promotion of tourism in the State. We have to consider the rival contentions in a realistic manner and we therefore pose the question as to whether denial of bar licence to three-star hotels would achieve the objective of reducing consumption, moving towards the objective of Article 47 of the Constitution of India. There is a mandatory provision contained in Rule 13(3B) prohibiting liquor sold in star hotels from being taken out of its premises. All sales of liquor in such hotels are essentially only for resident guests and visiting guests, who are permitted only to consume liquor within the hotel premises. So much so, the sale of liquor in the bar in the star hotels are essentially to foreign tourists and Indian tourists reaching Kerala from W.A.No.470/2012 & connected cases -21- outside. Kerala is a tourist destination not only for foreign tourists but for large number of tourists from other parts of India reaching Kerala to enjoy the beaches, hill resorts in the rain-forests and also the Kerala monsoon. There can be no doubt that the objective of reducing consumption of liquor cannot be achieved by prohibiting issuance of bar licence to new three star hotels.
19. When liquor is available all over the State in around 400 retail shops and in around 700 bar hotels, the Government certainly cannot reduce the consumption by denying licence to one class of star hotels. We notice that the fully owned Government Company, viz. Kerala State Beverages Corporation and two other Government Companies stated above have set up a very wide network for retail sale of liquor in the State by opening retail shops for sale of foreign liquor in bottles all over the State. In fact, the liquor sold by Beverages Corporation alone is 19.50 crore litres for the year ending 31/03/2011 and it is on a steady increase in the following year. This is besides the 13.30 crore litres sales of beer. Apart from the retail outlets, 708 bar restaurants/hotels are issued bar licence for retail sale of liquor from bottle i.e., in peg measure. The objective of the State is therefore to make available liquor through the outlets at W.A.No.470/2012 & connected cases -22- every place because the State and its agencies are well aware that when liquor sales are prohibited any place in the State, spurious liquor will take its place, causing revenue loss to the State and at times leading to liquor tragedies resulting even in loss of life. However, retention of liquor sales in the State itself is by reason of the fact that revenue from liquor sale is a major source, accounting for 30% of the total revenue of the State.
20. It may also be noticed that some States, for example Andhra Pradesh, tried total prohibition of liquor, some years back, which was an utter failure leading to widespread sale of spurious liquor in the market, causing revenue loss and frequent liquor tragedies. Consequently, the State reversed the prohibition experiment in an attempt to ensure safe and quality liquor in the State. On the whole, the network allowed to be maintained by any Government for retail sale of liquor is not to promote alcoholism but only means that spurious liquor should not be permitted in the State. Therefore, the answer to the question posed by us above, as is evident, is in the negative in as much as under the present disposition of availability of liquor in every nook and corner of the State in ordinary restaurants and hotels and in retail shops run by the W.A.No.470/2012 & connected cases -23- Government Companies, it would not be possible for the State to achieve any reduction in consumption of liquor by denying licence to three star hotels, which definitely are not set up to cater to the needs of the local people. Having exercised the wisdom to enact Rule 13 (3) and having retained the same; can the facility be denied on the strength of the very provision which promotes the grant with the objective of development of tourism? We are therefore convinced that the amendment to the Rule introduced by SRO No.779/2011 [GO(P) No.192/2011/TD dated 09/12/2011] disentitling bar licence to three star hotels cannot achieve any reduction on consumption and ultimately the objective of Article 47 of The Constitution Of India. The objective to proceed towards prohibition, as professed by the State is illusory.
21. Since we have already found that the objective of reducing consumption of alcohol in the State is not and cannot be achieved by prohibiting issuance of bar licence to new three star hotels, we have to now consider whether the discrimination and mala fide alleged by the appellants/petitioners stand proved. In this context, we have to first consider whether the amendment made to Rule 13(3) by deleting "three star" goes against the very objective of W.A.No.470/2012 & connected cases -24- the said Rule, which is promotion of tourism industry by granting bar licence to star hotels enjoying classification issued by the Ministry of Tourism, Government of India. We have already noticed above that the objective of Rule 13(3), from a plain reading, is to promote tourism and the Government while making Rule 13(3) rightly assumed that star hotels are the major infrastructure for tourism industry.
22. All star classifications are within the powers of the Department of Tourism, Government of India and are regulated by specific norms with regard to the service and facilities to be provided in such hotels. These star hotels have their own tariff and that is beyond the reach of the lay man. It may be noticed from the Finance Minister's speech that the tourism industry has earned a foreign exchange of Rs. 3,797 crores, which only indicates that foreign tourists are the major customers of star hotels, which do not cater to the needs of the lay man. The need to provide liquor in star hotels is recognised by Rule 13(3) itself, which provides for issuance of bar licence to star hotels for serving the guests in the hotels. So much so, the only question is whether the progressive deletion of 1, 2 and now, specifically, three-star hotels from entitlement for licence goes W.A.No.470/2012 & connected cases -25- against the purpose of Rule 13(3), which is promotion of tourism industry. The Government is actively promoting tourism by providing Rs.15 crores towards investment in tourism promotional activities in the current financial year. In this context, we feel that the law makers were well aware of Article 47 of the Constitution of India while introducing Rule 13(3) in the Rules because liquor is an essential service in the tourism industry and providing it inside the said star hotels for controlled consumption within the premises is not going to encourage liquor consumption among local people. This cannot and will not stand in the way of achieving the objective of prohibition contained in Article 47 of the Constitution of India.
23. It may be noticed that even in States where there is prohibition, star hotels are allowed to retain bar licence on strict licensing regime, to cater to the needs of tourists. Consequence of the amendment is such that new three star hotels will not have bar licence, whereas existing star hotels, whose licence are regularized through the provisos introduced to Rule 13(3) of the Rules will continue service of liquor to their guests. This discrimination is also not visualized by the Government of India, Ministry of Tourism, which classifies hotels into different classes by assigning them star W.A.No.470/2012 & connected cases -26- categories. Therefore, in order to maintain equality and equal opportunity to star hotels, the facilities to be made available, should be one and the same and the State Government cannot discriminate between such hotels by retaining liquor facility in existing Hotels and by denying it to new Hotels.
24. Western economies are facing recession along with the global community, but in a more acute way. The foreign tourists reaching from abroad are also looking for economy hotels and it cannot be assumed that foreign tourists necessarily occupy four star and five star hotels only. In fact on account of erosion in the value of Indian Rupee the average and below average Western tourists are attracted to India. Though this could lead to an increased occupancy in higher class hotels large number of foreign tourists are looking for economy hotels, which are three-star and below. India, particularly Kerala as a financially viable and cost effective tourism destination is known to Western tourists partly on account of the advantage of exchange rate and also the low rates of tariff and services maintained in Indian hotels than the relatively higher tariff of other countries including many other Asian destinations.
25. In Khoday Distilleries Ltd. v. State of Karnataka W.A.No.470/2012 & connected cases -27- [(1995) 1 SCC 574], the Supreme Court was concerned with primarily the question as to whether the citizen has a fundamental right to carry on trade or business in liquor and whether the rules brought out by the State of Karnataka, State of Kerala and State of Andhra Pradesh were invalid for the reason of it being violative of Articles 14, 19(1)(g), 47, 300-A, 301 and 304 of the Constitution of India. The two incidental questions which arose was, as to whether a monopoly for the manufacture, trade or business in liquor can be created in favour of the State; and whether reasonable restrictions under Article 19(6) of the Constitution can be placed only by Act of Legislature or by a subordinate legislation as well. Answering the question of fundamental right to carry on trade or business in the negative, the Supreme Court held that the correct interpretation to be placed on the expression "the right to practise any profession, or to carry on any occupation, trade or business" is to interpret it to "mean the right to practise any profession or to carry on any occupation, trade or business which can be legitimately pursued in a civilised society being not abhorrent to the generally accepted standards of its morality" (sic.). While the right to create a monopoly in favour of the State was conceded, it was also held:
W.A.No.470/2012 & connected cases -28- "The contention further that till prohibition is introduced, a citizen has a fundamental right to carry on trade or business in potable liquor has also no merit. All that the citizen can claim in such a situation is an equal right to carry on trade or business in potable liquor as against the other citizens. He cannot claim equal right to carry on the business against the State when the State reserves to itself the exclusive right to carry on such trade or business. When the State neither prohibits or monoplises the said business, the citizens cannot be discriminated against while granting licences to carry on such business. But the said equal right cannot be elevated to the status of a fundamental right". Summarising the law on the subject, the Supreme Court culled out 13 principles enumerated as (a) to (m) in para 60, of which (f), (g) and (h) are extracted hereunder:
"(f) For the same reason, again, the State can impose limitations and restrictions on the trade or business in potable liquor as a beverage which restrictions are in nature different from those imposed on the trade or business in legitimate activities and goods and articles which are res commercium.
The restrictions and limitations on the trade or business in potable liquor can again be both under Article 19(6) or otherwise. The restrictions and limitations can extend to the State carrying on the trade or business itself to the exclusion of and elimination of others and/or to preserving to itself the right to sell licences to do trade or business in the same, to others.
(g) When the State permits trade or business in the W.A.No.470/2012 & connected cases -29- potable liquor with or without limitation, the citizen has the right to carry on trade or business subject to the limitations, if any, and the State cannot make discrimination between the citizens who are qualified to carry on the trade or business.
(h) The State can adopt any mode of selling the licences for trade or business with a view to maximise its revenue so long as the method adopted is not discriminatory". Hence, when the State does not prohibit the trade or business in liquor, the citizen has necessarily the right to carry on such trade or business subject to the limitations and restrictions, if any, imposed on him, and can also successfully challenge any discrimination between such persons who are qualified to carry on the trade of business.
26. We therefore hold that the amendment to Rule 13(3) by SRO No.779/2011 [GO(P) No.192/2011/TD dated 09/12/2011] prohibiting issuance of bar licence to new three star hotels is discriminatory and violative of Article 14 of the Constitution of India because there is no difference between existing three-star hotels with bar licence and new three star hotels set up in the State because both are intended to serve customers on rather uniform tariff and to achieve the objective of tourism promotion in the State and in the Country as a whole; their business interests apart. The denial of bar licence through the impugned amendment to new three star hotels is W.A.No.470/2012 & connected cases -30- arbitrary and violative of Article 14 of the Constitution of India and going by the principle settled by the decision of the Supreme Court in Khoday's case, the appellants/petitioners are entitled to have SRO No.779/2011 [GO(P) No.192/2011/TD dated 09/12/2011] deleting three star hotels from the Rule struck down and consequential declaration for retention of three star hotels also in the said Rule and we order accordingly.
27. The next category of hotels are four star, five star and Heritage hotels, which are denied licence by virtue of introduction of sub-Rule (3E) to Rule 13 of the Rules, where under it is stated that no bar licence to new four star and five star and heritage hotels, otherwise entitled to bar licence under Rule 13(3), will be issued, if there is in existence any other restaurant/hotel with bar licence within 1 Km. in Municipal areas and within 3 Km. in Panchayat area. In this context, all our observations and findings with regard to three-star hotels apply to four-star and five-star hotels, which cater exclusively to the rich and outstandingly rich Foreign and Indian tourists. As already found by us, objective of Rule 13(3) is to promote tourism in the State and in this regard to provide essential service of liquor availability in star hotels. The Government also by retaining four-star, W.A.No.470/2012 & connected cases -31- five-star and heritage category hotels in Rule 13(3) accepts in principle the need to have bar licence in such hotels for complying with the object of tourism promotion. Our findings in the case of three star hotels with respect to the regularisation and renewal of licence periodically granted to existing hotels and the denial of the same to new three-star hotels, equally applies to four-star and five-star and also heritage hotels, which are all entitled to bar licence to serve both Foreign and Indian tourists.
28. The question therefore to be considered is whether the denial of licence to new hotels above four star category by virtue of the availability of a bar restaurant/hotel within 1 Km. in the Municipal area and within 3 Kms. in Panchayat area is arbitrary and violative of Article 14 of the Constitution of India. Does this in anyway, again, achieve the objective of Article 47? In the first place as already found by us, the category of tourists and guests going to ordinary bar hotels and restaurants are not the category visiting and staying in hotels with four-star and above classification. The availability of a four-star or higher classification hotel with bar licence within the prohibited distance of another bar hotel does not promote liquor consumption among the locals nor does the non-availability of W.A.No.470/2012 & connected cases -32- such Hotel reduce the consumption. If the Rule as such is applied; then the customers in new four-star hotels which does not provide liquor for want of licence would be expected to go to ordinary restaurants and hotels for consuming alcohol; which fortifies the contention of hostile discrimination and illegal preference canvassed by the petitioners. In other words, tourists and guests will identify and prefer four star hotels with bar licence which again leads to a clear discrimination by the Government in denying the facility i.e. provision for liquor in new hotels with four-star and above categorization. The distance rule prohibiting the grant of fresh licences within 1 Km./ 3 Kms. of existing licensees is brought in for new Hotels while permitting all existing restaurants/hotels having bar licence to continue irrespective of the number of Bar Hotels functioning within 1 Km. limit in Municipal and 3 Km. limit in other areas.
29. Further, the appellants/petitioners rightly pointed out that realistically anybody can imagine certain areas and spots important for tourism. For example Kovalam, a favored tourist destination in the Thiruvananthapuram coast line with two beaches and access to the ocean, comprises only an area of around 3 - 4 Kms. The presence of one hotel with bar licence in that area is a W.A.No.470/2012 & connected cases -33- disability for all new hotels being set up and it would only put an end to the expansion of the tourism industry. Therefore, realistically it can be noticed that all star hotels are mostly located in tourism centers and they are constructed side by side and are providing facilities exclusively to their guests. The distance regulation introduced in sub-rule (3E) to Rule 13 is completely destructive of the tourism policy of the government and the tourism industry by prohibiting promoters from venturing into hotel construction in places which are sought after tourist destinations. Competition is stultified and optional choices reduced. It is notorious that tourism sites are not fully developed anywhere in India, much less in Kerala, and there is tremendous potential for service industry like hotel industry that attracts tourists both from outside India and from North India to the beautiful hill stations such as Munnar, Wayanad, Periyar/Thekkadi and the peaceful beaches of Kovalam, Vizhinjam, Varkala and the like. Kerala has a tremendous potential for tourism with both hill stations and habitable beaches within short distances as also lush green plains with accessible water-ways. The Governments acceptability of this position is evident from the establishment of three International Airports in a small State like Kerala. W.A.No.470/2012 & connected cases -34-
30. We are therefore of the definite opinion that the distance Rule introduced by sub-rule (3E) to Rule 13 is an arbitrary provision creating monopoly for existing hotels and preventing construction of new hotels with three star and above classification in major tourism centers, which necessarily could be within 1 Km., or even less than that, of the existing hotels. It may be noticed that any promoter investing in hotel industry necessarily makes a market survey about the potential of the business, and in fact the Government should leave it to investors to decide whether there is scope and potential for new hotels and if so to promote the industry by giving all licences and clearances, if the ultimate objective of tourism promotion is to be achieved. In our view, the Policy of the Government introduced through amendment in Rule 13 is to stagnate the industry and it is against the very objective of Rule 13 (3). Tested with the main objective of the State to create employment potential in the State and to make it a major destination for tourists also; the sub- rule fails. Going by the principle laid down in Khoday's case, we hold that sub-rule (3E) of Rule 13 results in discrimination. Having upheld the challenge against the deletion of three star from Rule 13 (3) and also sub-rule (3E) of Rule 13, we do not think it is necessary W.A.No.470/2012 & connected cases -35- to consider the challenge against the provisos.
31. In W.A.No.470 of 2012 and W.P.(C).Nos.188, 2529, 5008, 5212 and 5311 of 2012, the appellant/petitioners have raised additional ground by stating that even if the two amendments alternatively challenged by them are not sustained by this Court, still they are entitled to licence because all these petitioners have obtained star classification from the Ministry of Tourism, Government of India much before the introduction of the amendment and their applications have been recommended by the Excise Commissioner before the amendment. Sanction was not accorded by the Government due to the amendment. In some instances, based on the direction of this Court the question of sanction was reconsidered and while reconsidering the case, the Rule proposed to be amended was taken into consideration for rejecting the sanction. So far as the other cases are concerned, in the original order, the position prior to the amendment was reckoned and if so, the amended provision cannot be relied on by the respondents to deny the licence. The State has relied on the decision of the Supreme Court reported in Kuldeep Singh v. Govt. of NCT of Delhi [(2006) 5 SCC 702] and State of Kerala v. B.Six Holiday Resorts (P) Ltd., [(2010) 5 SCC 186], W.A.No.470/2012 & connected cases -36- wherein the Supreme Court held that the law applicable as on the date of consideration of application for grant of licence is to be applied. The learned counsel for the appellants/petitioners have relied on a Division Bench judgment of this Court in W.A.No.469 of 2012 dated 14.03.2012, wherein this Court held that the law to be applied is the law as on the date on which the Excise Commissioner reconsidered application for grant of licence and when he recommends it based on the Rule in force as on that date, then the subsequent amendment should not be relied on by the Government to deny licence. We also notice that the Special Leave Petition filed by the State against the judgment in W.A.No.469 of 2012 has been dismissed by the Hon'ble Supreme Court by order dated 20.06.2012 in Petition for Special Leave to Appeal (Civil) No.18392/2012, however keeping the question of law open. Between the Government and the Excise authorities, consideration on merit is done by the Excise Authorities and when the Excise Commissioner recommends with reference to the law as on the date of his order, then the Government cannot decline it merely because they passed amendment subsequent to the order. However, we do not think we should enter into the controversy because our judgment above helps W.A.No.470/2012 & connected cases -37- these appellants/petitioners also to get licence. We therefore allow all these Writ Appeals and Writ Petitions declaring the deletion of three star hotels from Rule 13(3) by SRO.No.779/2011 dated 09/12/2011 as arbitrary, discriminatory and violative of Article 14 of the Constitution of India and also by declaring that addition of sub-rule (3E) to Rule 13 by SRO No.202/2012 dated 27/03/2012 as arbitrary, discriminatory and violative of Article 14 of the Constitution of India.
We consequently, allow all the Writ Appeals and Writ Petitions by declaring the impugned amendments as unconstitutional and by vacating the orders impugned in the W.P.(C)s. with direction to the respondents to consider and grant FL-3 licence to all eligible Hotels with 3-Star and above and Heritage classification based on the unamended Rules.
C.N.Ramachandran Nair, Judge K.Vinod Chandran, Judge jg