*THE HONOURABLE SRI JUSTICE V.V.S.RAO +WRIT PETITION No.10711 of 2001 %16-3-2006 # Vemuri Lakshmi Nageswara Rao and another ...PETITIONERS Vs. $ The Joint Collector & Additional District Magistrate, Krishna District at Machilipatnam and others. ...RESPONDENTS ! COUNSEL FOR PETITIONERS: Sri T.S.Anand, ^COUNSEL FOR RESPONDENT No.1: Government Pleader for Home ^COUNSEL FOR RESPONDENT Nos.2 to 4: Sri M.S.Prasad <GIST >HEAD NOTE: ? CASES REFERRED: 1. AIR 1974 SC 104 2. 1982 (1) ALT 306 3. AIR 19990 SC 2292 4. 1993 (1) ALT 661 (FB) 5. AIR 1996 SC 140 6. 1992 (3) ALT 312 7. 1986 (2) ALT 92 8. AIR 1991 AP 170 9. AIR 1968 SC 620 10.(1867) L.R.2 Ch.App.294 THE HON’BLE SRI JUSTICE V.V.S.RAO WRIT PETITION No.10711 OF 2001 16.3.2006 Between: Vemuri Lakshmi Nageswara Rao and another … Petitioner AND The Joint Collector & Additional District Magistrate, Krishna District at Machilipatnam and others. … Respondents THE HON’BLE SRI JUSTICE V.V.S.RAO WRIT PETITION No.10711 OF 2001 ORDER: The two petitioners assail the order of first respondent, dated 19.05.2001, as illegal, void and opposed to principles of natural justice and seek to set aside the said order. The first respondent issued impugned order transferring ‘B’ Form licence to the third respondent in respect of Sri Rama Krishna Theatre, Machilipatnam. Be it noted, the first respondent exercised the powers under the provisions of A.P.Cinemas (Regulation) Act, 1955 (hereafter called, the Act) and A.P.Cinemas (Regulation) Rules, 1970 (hereafter called, the Rules). The fact of the matter, in brief, is as follows. A cinema theatre known as M/s.Sagar Talkies was constructed by Sava Srinivasa Sastry and Sava Nachara Vara Prasad some time prior to 1974. In that year, the two owners of the cinema theatre sold the theatre to fifteen persons under registered sale deed, dated 26.05.1974. Those persons constituted themselves into a partnership firm and were running the theatre in the name and style of Rama Krishna Talkies. The firm was again re-constituted on 14.07.1990. The cinema theatre obtained ‘B’ form licence under the Act and the Rules in the name of one Goriparthi Narasimha Raju, who is the uncle of the third respondent, who was at that time the Managing partner, with the consent of all other partners. It is alleged that Nalli Sitaramachandra Rao and Nalli Sundaramma, two of the partners, issued a notice of dissolution allegedly dissolving the firm with effect from 03.11.2000. It is therefore alleged that from 04.11.2000, the third respondent is running cinema theatre without any valid licence. In the meanwhile, on 07.11.2000, the two partners, who allegedly gave notice of dissolution as referred to hereinabove, sold their shares in the assets and liabilities to the petitioners duly intimating the same to the first respondent and further requesting not to renew or transfer the licence. It is also alleged that Naga Raju, the Managing partner, addressed a letter to the first respondent to cancel ‘B’ form licence on the ground that there are disputes among the partners. The third respondent herein along with three erstwhile partners and two strangers, allegedly constituted the fourth respondent firm, came to be in unauthorized occupation of the cinema theatre and business of the original firm – the second respondent herein. The petitioners, who are father and son, sent telegram and the detailed representations to the first respondent informing that the fourth respondent is running the theatre illegally without any valid licence. The first respondent issued notice to all the partners and hearing was fixed on different dates. Apprehending that the new firm would continue to screen the films without any objection from the first respondent, the petitioners filed W.P.No.8370 of 2001 directing the first respondent to dispose of the objections filed by the petitioners whreafter the impugned order was passed. The petitioners contend that the second respondent firm having been dissolved with effect from 03.11.2000, the Managing partner of the said firm could not have validly transferred the ‘B’ Form licence in favour of fourth respondent. For that reason the impugned order transferring the licence by the erstwhile Managing partner in favour of the third respondent is illegal and arbitrary. The first respondent filed a counter affidavit opposing the writ petition. It is stated that the ‘B’ Form licence issued to the second respondent in the name of Goriparthi Naga Raju as a Managing partner was renewed up to 12.10.2003. It is further stated as follows. Narasimha Raju sent a representation informing that the screening of the films in their theatre is stopped with effect from 01.11.2000 in view of the disputes among the partners and that further intimation will be given as and when it is decided to resume the screening. The third respondent made a representation on 09.11.2000 informing that they are operating the theatre from 09.11.2000 as per the licence which is valid up to 2002 and that all the partners unanimously authorized him (third respondent) to run the theatre. After receiving the said representation, dated 09.11.2000, of the third respondent, a notice was issued to all the partners as well as the petitioners herein to attend before licensing authority. At that stage, the third respondent applied to the first respondent to transfer ‘B’ Form licence of the theatre in his name with due consent of former Managing partner in Form-H. The matter was referred to Mandal Revenue Officer for enquiry, as all the sixteen partners are close relatives. The third respondent also filed writ petition being W.P.No.619 of 2001 seeking a direction to the first respondent to consider the application of the partners for assignment of licence as contemplated under Rule 12A (b)(i) of the Rules. This Court ordered status quo regarding screening of the films and directed to dispose of the application for transfer/assignment of licence. In view of the orders, the screening could not be stopped. The Mandal Revenue Officer after conducting enquiry submitted report stating that on 17.04.2001, out of sixteen partners, twelve decided to change the Managing partner in favour of the third respondent and that they also gave the statement to that effect. Each of the twelve partners had 75 per cent share in the firm. Out of the four remaining partners, two partners Sitaramachandra Rao and Sundaramma gave registered notice dissolving the firm and another partner Kola Kesava Raju died as a result of which one of his family members was taken as partner. Yet another partner was not available in the village. The Mandal revenue Officer also recommended transfer of the licence from Narasimha Raju to the third respondent. All the other partners gave consent and therefore it has to be construed that the third respondent is unlawful possession of the theatre and is entitled to run the theatre. The third respondent has filed a counter affidavit opposing the writ petition. The contents of the same be noticed in brief as follows. The firm was constituted in the name and style of M/s.Sri Rama Krishna Theatre in 1975 with sixteen partners and the same was not constituted in the name and style of M/s.Rama Krishna Talkies as alleged. The said firm was continued with additions and deletions of partners either due to retirement/death of the partners besides other reasons. As per the partnership deed, retirement or death of any partner shall not result in dissolution. The Managing partner Narasimha Raju became old and was not in a position to attend to day to day activities. Therefore, it was decided the third respondent should manage the theatre, as Managing partner. The then Managing partner agreed for the same and signed necessary papers. The petitioners are business rivals running Krishna Kishore Talkies. At their behest, the then Managing partner addressed a letter to the first respondent informing that the theatre is being closed down due to disputes among the partners. However, in the interest of the firm, he agreed to transfer the ‘B’ Form licence in favour of the third respondent and gave a letter to that effect. The petitioners with an intention to close down the theatre got issued notice dated 03.11.2000 by the partners who retired in December, 1999 stating that they want to dissolve the firm. As they already retired from the firm, they are not entitled to dissolve the firm. The licence given to the theatre was valid up to 12.10.2003 and therefore the allegation that theatre is being run without valid licence is not correct. The allegation that Sitarama Chandra Rao and Sundaramma sold their shares to the petitioners is false and in any event, the same is void. The firm was reconstituted on 09.11.2000 and the previous Managing partner gave a letter of consent in Form H under Rule 12A(b)(i) of the Rules for transferring the licence in favour of the third respondent. The petitioners sent frivolous petitions without any authority to the officials of Entertainment Tax Department and made number of representations to the first respondent to close the theatre. They have no locus standi to interfere in the running of the theatre by the third respondent on behalf of the firm. In view of the consent given by the previous Managing partner, the first respondent after issuing notices to all the partners, who did not raise any objection, transferred the licence. Sitarama Chandra Rao and Sundaramma also did not raise any objection before the first respondent. The first respondent issued adequate opportunity to the writ petitioners before passing impugned order and the same does not suffer from any illegality. Sri P.S.Raghuram, learned counsel appearing for the petitioners, submits that the petitioners being the purchasers of the share of two partners in the firm have locus standi to question the transfer of ‘B’ form licence by the Joint Collector in favour of the newly constituted firm as the petitioners have a right to share in the partnership. He also submits that the first respondent has issued the impugned order placing reliance on the report of the Mandal Revenue Officer and thus the same is vitiated by the lack of independent consideration by a statutory authority. Nextly, it is contended that the first respondent cannot transfer the licence of a dissolved firm to the newly constituted firm as it is not in lawful possession of cinema theatre and that there is no compliance with Rule 12-A(b) of the Rules. He also contends that the application under Rule 12-A(b) of the Rules has to be accompanied by an affidavit, but, in this case, the application was renewed improperly without an affidavit and therefore, the impugned order is vitiated by improper procedure adopted by the first respondent. The learned counsel placed reliance on various provisions of the Partnership Act, 1932, as well as the decisions reported in M.C.Chockalingam v V.Manickavasagam, Koratani Suramma v Government of A.P.,, Krishna Kishore Firm v Government of A.P.,, Y.Anasuya v Government of A.P. and R.V.Bhupal Prasad v State of A.P. The learned Government Pleader for Home, Sri K.Ramesh, produced the file from the Office of the first respondent. He submits that when an application was made seeking transfer of the licence, the first respondent got an enquiry conducted by the Mandal Revenue Officer and having regard to the consent given by other partners in favour of the third respondent, the licence was transferred in favour of the third respondent. He would urge that the petitioners have already filed a suit in civil Court and they have to work out their remedies there. The learned counsel for respondents 3 and 4, Sri M.S.Prasad, submits that the petitioners are not partners of any firm and therefore, the writ petition is not maintainable. Secondly, he would urge that the petitioners have already filed a suit before the civil Court seeking for dissolution of the firm and therefore, no importance can be attached to the submission that the firm is already dissolved. He would also urge that the old firm was constituted with sixteen partners and the death or retirement of any partner does not result in dissolution of the firm. The firm was reconstituted with majority of the partners of the old firm and the same cannot be said to be unlawful possession of the cinema theatre. According to the learned counsel, all the partners are co-owners of the property and possession of the co-owners is not unlawful. Sundaramma and her son Sitaramachandra Rao did not file any objections even after receipt of the notice of enquiry. Therefore, the petitioners cannot claim any right to challenge the impugned order. Two questions would arise for consideration, namely, whether the possession of the cinema theatre by the partners of the reconstituted firm is unlawful, and secondly, whether the petitioners, who filed the suit for dissolution of the old firm, can question the impugned order transferring the licence in favour of the third respondent as representing the firm. In Re point No.1: Exhibition of cinematograph films is regulated by the Act and the Rules. Under Section 3 of the Act, no person shall give an exhibition by means of a cinematograph in premises other than in a place licensed under the Act. In the present dispensation, Joint Collector is the licensing authority. Section 5 of the Act contains the restrictions subject to which licensing authority can exercise the powers under the Act. Under the provisions of the Act, the licensing authority can issue licences subject to substantial compliance with the provisions of the Act and the Rules, suspend/cancel such licences for any contravention of the provisions of the Act, Rules or other provisions of the law, impose fines/penalties for contravention of the conditions of licence and initiate criminal action against a licensee in certain given circumstances. As per Section 5(1)(a) of the Act, licensing authority should be satisfied that the provisions of the Act and the Rules made under the Act have been substantially complied with. The Rules made in exercise of powers under Sections 6 and 11 of the Act contain six Chapters. Chapter I is titled as General. It has Rules 4, 6 and 7, which contain certain restrictions. Under Rule 4 of the Rules, a person below the age of twenty years cannot be granted licence. It further provides that a company or firm or association of individuals whether incorporated or not shall be entitled to obtain or hold any permission or licence under the Act. Rule 6 of the Rules is to the effect that every cinema building has to comply with certain requirements as specified in appendices I to III and V. Rule 7 of the Rules contains restrictions on grounds of population and distance. Chapter II contains the modalities for obtaining permission for construction or re-construction of a cinema building and installation of machinery. Chapter IV and V deal with fees payable and powers and functions of licensing authority respectively. Chapter III contains Rules 11-A, 11-B, 12-A, 12-B and 13 to 15. Before dealing with these, a reference may be made to Rule 5 of the Rules, which provides for transfer of permission for construction or of licence on the death of the holder of permission/licence. Rule 5(1) of the Rules deals with transfer of permission granted for construction of cinema building under Section 6(2) read with Rule 9-B of the Rules. Rule 5(2) of the Rules deals with transfer of cinematograph licence. The same reads as under. 5. Transfer of permission for construction or of licence on the death of the holder of permission/licence:- (2) (a) Where the holder of a cinematograph licence dies, the person succeeding to the possession of the cinema building covered by the licence of the deceased, may, for a period of three months, use the licence as if it has been granted to himself; Provided that such person has, within thirty days of the death of the licensee, informed the licensing authority which granted the licence of the death of the licensee and of his own intention to use the licence; Provided further that no licence shall be used after the date on which it would have ceased to be effective without renewal in the hands of the deceased licensee. (b) The licensing authority may, on application made to it within three months of the death of the licensee, transfer the licence to the person succeeding to the possession of the cinema building covered by the licence. (emphasis supplied) Rule 5(2)(b) of the Rules empowers the licensing authority to transfer cinematograph licence – in the event of death of original licensee; to the person succeeding to the possession of the cinema building covered by the licence. It further provides that when the licensee dies, the person succeeding to possession can use the licence for a period of three months as if it had been granted to himself (transferee). This is, however, subject to two conditions, namely, the person succeeding to possession of the cinema building must inform the licensing authority about the death of the original licensee, and inform the intention to use the licence; and, secondly, no licence shall be used after the date, if it would have ceased to be effective without renewal in the hands of the deceased licensee. Keeping this in view, the Rules in Chapter III of the Rules may now be considered. Rule 11-A in Chapter III requires an application for grant of licence to be made to the licensing authority in Form-A II accompanied by the construction plans, evidence of payment of necessary fees and other documents/certificates as well as a declaration by the application. Sub-Rules (1) and (2) of Rule 11-B of the Rules are relevant and read as under. 11-B. Grant of licence to Cinema Building:- (1) Within fifteen days of receipt of such application, the licensing authority shall- a. If the application is not in accordance with the rules dispose it of in accordance with Clause (a) of sub-rule 9(B). b. If the application is in order, forward a copy of the application together with its enclosures to the Electrical Inspector and the Executive Engineer (R&B) (in the case of permanent cinema building only) asking for their reports and certificates within thirty days from the date of receipt of the copy of the application and obtain their acknowledgements: (2) On receipt of the reports and certificates referred to in Clause (b) for sub-rule (1) or, if the same have not been received in time on consideration of the certificates referred to in Clause (c) of Rule 11-A on merits, if the licensing authority is satisfied that the applicant is in lawful possession of the site, building and equipment he shall, within ten days from the date of receipt of the above reports and certificates or the due date for the receipt of above reports and certificates, grant a licence in Form-B with or without adding additional conditions thereto, consistent with the provisions of these rules, as he may deem fit in the interest of the health and safety of the public; Provided that if the licensing authority is satisfied that the provisions of these rules have not been fulfilled and or that, in the case of a temporary cinema building the provisions of Appendix-IV are not fulfilled he may refuse to grant the licence applied for and communicate to the applicant the reasons for such refusal. Provided also that the period of validity of a licence shall so far it may be co-related with the period of validity of electrical and fire certificate granted in accordance with the provisions in Appendix-VI. (emphasis supplied) At the time of granting licence, the licensing authority may within fifteen days of the receipt of application for licence, either reject application if it is not in accordance with the Rules directing the applicant to re-submit within a period of sixty days or if the application is in order, forward the copy of the application to Electrical Inspector and the Executive Engineer of Department of Roads & Buildings for their reports. Under sub-rule (2) of Rule 11-B of the Rules, after receipt of the reports from those two Departments, the licensing authority may grant licence in Form-B with or without additional conditions thereto. But, licensing authority shall satisfy himself that the applicant is in lawful possession of the site, building and equipment, before granting licence. It is interesting to note that the Act and the Rules are silent as to the consequences in the event of a licensee losing possession of the cinema building or inducting a third party as a lessee or sub-lessee of the cinema building to exhibit cinematograph films. Be that as it is, Rules 12-A and 12-B of the Rules deal with renewal of licence. Rule 12-A (a) of the Rules deals with making an application for renewal of licence ninety days before the expiry of licence. Such application shall be in triplicate and must be accompanied by the certificates of longevity of the building issued by the Executive Engineer (R&B), certificate of validity of Electrical and Fire certificate issued by Electrical Inspector. In plain terms, Rule 12-B of the Rules is to the effect that whenever there is a transfer of possession of site, building and equipment (be it noted it is not transfer of title), the applicant seeking transfer has to file a letter of consent in writing of the original licensee, to the effect that he has no objection to the licensee being transferred in the name of transferee has to be filed. If it is a case of transfer of title, the Rule requires an affidavit from the original licensee. A distinction is, therefore, to be made that when it is a mere transfer of possession of building, a letter of consent would suffice, whereas in the case of transfer of title, the original licensee of title holder should necessarily give an affidavit to the effect that he has no objection for transfer of licence. Rule 12-B deals with renewal of licences to cinema buildings. Under Rule 12-B(2) of the Rules, certain certificates for renewals are dispensed with. Rule 12-B(1) of the Rules with its provisos reads as under. 12-B. Renewal of Licences to cinema buildings:- 1. Within fifteen days of receipt of such application, the licensing authority shall: (a) If the application is not in accordance with the rules, dispose it of in accordance with clause (a) of sub-rule 91) of Rule 9(B). (b) If the application is in order, the electrical and fire certificate is valid and if the certificate of longevity of the building initially issued by the concerned Executive Engineer (R&B) is valid for the period for which the renewal of licence is applied for; the licence may be renewed for the period applied for; Provided further that, in case of an application for renewal of a (licence) in respect of a permanent cinema building, which is made three months in advance of the expiry of the licence, if the authorities concerned do not furnish their reports and certificates in time, the respective certificates shall be deemed to have been renewed. Provided that if the licensing authority is satisfied that the provisions of these rules have not been fulfilled he may refuse to grant the renewal applied for and communicate to the applicant the reasons for such refusal. The other two provisos are omitted. Under the above Rule, the same procedure that is to be followed at the time of grant of licence under Rule 11-B of the Rules is adumbrated. The Joint Collector can refuse an application for renewal if it is not in accordance with the Act or Rules and if the application is in order, he may renew licence for the period applied after satisfying that the provisions of the Rules are satisfied. Though there is no provision in Rule 12-B (1) akin to Rule 11-B (2) of the Rules requiring the licensing authority to satisfy whether the applicant is in lawful possession of the building or not, having regard to the language in the second proviso to Rule 12-B(1) of the Rules, it has to be held that even at the stage of renewal of licence, the licensing authority must satisfy himself that the applicant