*THE HON’BLE MR. JUSTICE C.V.NAGARJUNA REDDY +W.P No.3360 OF 2008 %24-3-2008 #Gayatri Bar and Restasurant, reptd., by its Proprietor-Sri B.Narasimha Reddy, Business, Kazipet, Warantal. … Petitioner $The Deputy Commissioner of Prohibition and Excise, Warangal Division, Warangal and two others. … Respondents !Counsel for the petitioners: Sri S.Satyam Reddy ^Counsel for the respondents: AGP for Prohibition & Excise. <Gist: >Head Note: ? Cases referred: 1) (1598) 5 Co.Rep.99b 2) (1905) AC 426 at 430 3) Keir & Lawson Cases in Constitutional Law 402 (1967) 4) (1994) 6 SCC 651. 5) AIR 1954 SC 220 6) AIR 1957 SC 414 7) AIR 1958 SC 398 8) (1975) 1 SCC 737 9) (1995) 1 SCC 574 10) (1986) 4 SCC 566 11) (2006) 4 SCC 327 12) 2008 (1) ALT 578 13) AIR 1961 SC 1506 14) (2003) SCC. 107 IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) PRESENT: THE HON’BLE MR. JUSTICE C.V.NAGARJUNA REDDY MONDAY, THE 24TH DAY OF MARCH, TWO THOUSAND EIGHT ONLY WRIT PETITION No.3360 OF 2008 Between: Gayatri Bar and Restasurant, reptd., by its Proprietor-Sri B.Narasimha Reddy, Business, Kazipet, Warantal. … Petitioner AND The Deputy Commissioner of Prohibition and Excise, Warangal Division, Warangal and two others. … Respondents Counsel for the petitioners: Sri S.Satyam Reddy Counsel for the respondents: AGP for Prohibition & Excise. This Court made the following: ORDER: The petitioner, who was vexed with needless litigation on two earlier occasions, has perforce filed this Writ Petition seeking invalidation of order dated 7-2-2008 passed by respondent No.1 in purported exercise of his power under Rule 5(6) of the Andhra Pradesh Excise (Grant of Licence of Selling by Bar and Conditions of Licence) Rules, 2005 (for short “the Rules”) as amended in G.O.Ms.No.596, dated 26-5-2006. The petitioner approached respondent No.2 for grant of prior clearance for obtaining licence in Form-2B for establishment and running of a Bar and Restaurant on the main road of Kazipet, Warangal District. Vide his order dated 13-9-2007 respondent No.2 directed respondent No.1 to inspect the proposed premises for issue of prior clearance and submit a report to him. Respondent No.1, in turn, called for a report from respondent No.3. Accordingly, respondent No.3, after inspection and making necessary enquiries, submitted his report dated 26- 10-2007 to respondent No.1, who, in turn, evidently forwarded the same to respondent No.2. In his report respondent No.3 recommended for issue of prior clearance. Obviously, sensing that respondent No.2 is likely to grant order of prior clearance in favour of the petitioner, one Sri P.Satish Reddy, an existing Form-2B licensee running a Bar and Restaurant in a nearby place to the proposed Bar and Restaurant, filed Writ Petition No.20606 of 2007 in this Court to direct the Commissioner of Prohibition and Excise (respondent No.2 herein) not to grant prior clearance in favour of the petitioner. While the said Writ Petition was pending, respondent No.2 by his order dated 7-11-2007 granted prior clearance to the petitioner. It appears that the said fact was not placed before this Court during hearing of the said Writ Petition, which was dismissed by order, dated 19-11-2007. The learned Judge in his order observed that the application filed by the petitioner for grant of licence was at the stage of consideration; that from a perusal of Rule 5 it is evident that there is no restriction for grant of licence in the middle of licensing year; that there is no express prohibition for maintenance of minimum distance between the two licensed premises; and that whether there was need for a new Bar to come up or not is required to be considered by the licensing authority. On the said premises, the learned Judge, while declining to interfere with the further consideration of the petitioner’s application for prior clearance, observed that it was open for the competent authority to consider the requirement of issuance of licence in Form-2B on the application submitted by the petitioner herein. Undeterred by the above order of this Court, the said Sri P.Satish Reddy again approached this Court by filing Writ Petition No.25582 of 2007 for a Writ of Mandamus to set aside order dated 7-11-2007 passed by respondent No.2 herein, whereby he granted prior clearance in favour of the petitioner. The learned Judge, who dismissed the said Writ Petition by order dated 6-12-2007 reiterated his view that the question whether there was a requirement for permitting a new Bar to come up has to be assessed by the licensing authority under the Rules and the writ petitioner therein, who is an existing licensee, had no say on that issue. The learned Judge also took note of the submission made by the learned Government pleader for Prohibition and Excise that during the previous licensing year there were ten Bars and Restaurants and during the current year there are only eight Bars and Restaurants in the town of Kazipet. The learned Judge held that he did not find any illegality in the proceedings dated 7-11-2007 issued by respondent No.2 in favour of the petitioner herein. If the petitioner thought that with the dismissal of the said two Writ Petitions his cup of woes got exhausted, he was thoroughly mistaken. Respondent No.1, who is conferred with the power of granting Form-2B License proved to be the petitioner’s stumbling block in his relentless effort to establish the Bar and Restaurant as he passed the impugned order, whereby he brushed aside the prior clearance granted by respondent No.2, two reports sent by respondent No.3 and the existing law. The petitioner is, therefore, impelled to file this Writ Petition. Heard Sri S.Satyam Reddy, learned counsel for the petitioner, learned Assistant Government Pleader for Prohibition and Excise for the respondents, and perused the record. Before examining the legality or otherwise of the impugned order, it is useful to refer to the relevant provisions of the Rules. Section 3(b) defines ‘Bar’ as meaning the privilege granted under this Act to an establishment where food is served and for sale of Indian Liquor and Foreign Liquor, in loose for consumption on the licensed premises. Rule 4 envisages grant of licence in Form-2B to serve food and for sale of Indian Liquor and Foreign Liquor in glasses or pegs for consumption within the licensed premises but not for sale of Indian Liquor and Foreign Liquor for removing it out of the licensed premises. This provision further envisages that such licence may be granted in the establishment functioning in municipalities and within a belt area of 2 kms., of the periphery of such Municipalities, Municipal Corporations and within a belt area of 5 kms., of the periphery of such Municipal Corporations and in Tourism Centers (except places of religious tourism) as notified by the Department of Tourism of the State Government or Central Government. Under Rule 5, a person intending to establish a Bar, may submit an application in Form-1A to the Commissioner enclosing a challan of Rs.1,000/- to get prior clearance. The Commissioner, having due regard to the requirement and other factors as he deems fit, may grant a prior clearance in Form-2A. The proviso to sub-Rule (2) says that grant of prior clearance shall not confer any right on the applicant for grant of licence in Form-2B and the holder thereof shall not claim for any compensation or loss in case licence in Form-2B is not granted. Under sub-Rule (3) thereof, a holder of prior clearance in Form-2A may apply in Form-1B for grant of licence for a Bar to the concerned Prohibition and Excise Superintendent where the applicant’s premises is to be licensed and the applicant shall pay a sum of Rs.10,000/- towards licence fees by way of a challan. Under sub- Rule (5) the Excise Superintendent after making such enquiry as he may deem fit to ascertain the bonafides of the applicant and verifying the particulars furnished in the application should examine the suitability of the premises for granting Bar and forward the same to the Deputy Commissioner of Prohibition and Excise along with his report. Under sub-Rule (6), the Deputy Commissioner, after causing such enquiry as he may deem fit, may grant licence. Rule 6 of the Rules imposes restrictions on the grant of license, qua size of the premises, facilities to be made available therein, distances to be maintained between educational and religious institutions, national highways, hospitals etc. Significantly, this Rule does not impose any restrictions on the distance to be maintained between two Bars and Bar and a premises covered by A.4 License. Under Rule 8, failure of the applicant to remit fees or to rectify the defects or to comply with other directions relating to the premises, within the time allowed shall entail rejection of an application. Under Rule 9, the period of licence is prescribed as one year commencing from 1st July and ending with 30th June of the succeeding year. Rule 10 prescribes payment of annual Licence fees as fixed in the schedule. The above discussed Rules indicate that as a first step for obtaining licence for running a Bar and Restaurant it is necessary for a person to obtain prior clearance from the head of hierarchical authorities, viz., the Commissioner of Prohibition and Excise. Such a prior clearance will be issued by the Commissioner only if he is satisfied that there is requirement for establishment of such a Bar and Restaurant and taking into consideration other relevant factors. Though proviso to sub-Rule (2) of Rule 5 contains a caveat that grant of prior clearance by the Commissioner shall not confer any right on the applicant for grant of Form-2B licence and the licensing authority is vested with the discretion to grant licence by causing such enquiry as he deems fit, the discretion of the licensing authority is narrowed down with the grant of prior clearance by the Commissioner after being satisfied about the requirement of establishment of a new Bar and Restaurant. This discretion is further limited with the Exercise Superintendent under sub-Rule (5), submitting his report verifying the suitability of the premises and bonafides of the applicant. In true sense, grant of licence in Form-2B, after issuance of prior clearance in Form-2A by the Commissioner and submission of report by the Excise Superintendent is only a ministerial act unless the licensing authority either differs with the findings contained in the report of the Excise Superintendent or found existence of any fact not considered by the Excise Superintendent which disentitles the licensee for the grant of license for violation of Rule 6 as re-produced above or any other provision of law in force at the relevant time. The above Rules also show that there are no restrictions on granting of Form-2B licence during the middle of the licensing year nor the Rules envisage any minimum distance between the two licensed premises. This, in my understanding, is the true purport of Rule 5, as amended in G.O.Ms.No.596 dated 26-5- 2006. With this analysis of the legal provisions, let me now consider the sustainability or otherwise of the impugned order. In his order, respondent No.1 referred to report dated 26-10-2007 sent by respondent No.3 in the context of consideration of the petitioner’s application for prior clearance by respondent No.2. He has taken note of the objections of Sri P.Satish Reddy, the licensee of an existing Bar and Restaurant, referred to by respondent No.3 in his report on the ground of the distance between the existing Bar and Restaurant and the proposed Bar being only 13.1/2 meters away and also against grant of licence during the middle of the year. Respondent No.1 also took note of the opinion of respondent No.3 that there is no restriction on the grant of license on both the said grounds under the Rules. The perusal of the order further reveals that respondent No.1 - who considered the objections of existing A4 Licensees in the area, viz., M/s.Sai Ram Wines and M/s.Venkata Ramana Wines, forwarded by respondent No.3 – claimed to have sent a detailed report on 14- 11-2007 to respondent No.2 not to issue prior clearance and to reject the petitioner’s application, that, but prior to the said report itself, respondent No.2 granted prior clearance on 7-11-2007, that based on the prior clearance, the petitioner submitted his application for grant of Form-2B licence before respondent No.3, and respondent No.1 submitted another report to respondent No.2 to reject the petitioner’s application for grant of licence, and that respondent No.2, in turn, directed respondent No.1 to re- examine the issue in the light of the petitioner’s representation dated 17-12-2007, wherein he is stated to have mentioned that Sri P.Satish Reddy instigated M/s.Sai Ram Wines and M/s.Venkata Ramana Wines to file objections to establish trade monopoly in the area. Respondent No.1 in his order further stated that on 5-1- 2008 fresh objections were filed by Sri P.Satish Reddy; Smt.P.Geetha, Licensee of M/s.Rajkamal Restaurant and Bar, Kazipet; Sri P.Srinivasa Reddy, Lincensee of M/s.Venkata Ramana Wines; and Sri G.Venkateshwar Rao, Licensee of M/s.Sai Ram Wines, Kazipet, against grant of Form- 2B License; that on 4-2-2008 Sri Mandhadi Satyanarayana Reddy, MLA, Hanmakonda, pressed hard for disposal of the issue; and that the petitioner also insisted on passing an order. Respondent No.1 held that as per the existing rule position there is no restriction for issue of Bar licenses even in the middle of the year. But, he reasoned that “from the point of natural justice to the existing licensees there is need to restrict the issue of new Bar licenses for this lease year 2007-08”. He then went back to the days of auctioning of arrack shops when no new arrack shops were sanctioned in the middle of the year and noted the absence of any such restriction for sanction of Bar in the middle of the licensing year. Respondent No.1 opined that absence of this restriction is giving scope for rivalry between the existing licensees of A.4 shops and Bars on the one side and new applicants for Bar licenses on the other. He also referred to the fact that under the existing Rules there is no distance restriction between a Bar and Bar and a Bar and shop under A.4 licenses and stressed the need to restrict the number of Bars at the beginning of the year itself taking the population into consideration. Respondent No.1 also felt that these aspects need to be examined for bringing out certain amendments to the existing Rules to avoid rivalry between the existing licensees and the new applicants. Respondent No.1 then observed that keeping in view all the objection petitions, reports submitted by respondent No.3, application of the petitioner, the Act and the Rules and the fact that the issue of prior clearance does not confer any right to grant Form-2B license on the petitioner, the application of the petitioner was rejected. Counter-affidavit has been filed by Sri C. Jagadish Kumar Reddy, Deputy Commissioner, Prohibition & Excise, Warangal Division. He stated that after respondent No.2 directed him to re-examine the issue, he issued proceedings dated 9- 1-2008 wherein he recommended to respondent No.2 to reject the application for Bar license. He averred that the impugned proceedings were issued to avoid unhealthy competition. Before proceeding further, it is necessary to point out that the contents of the counter-affidavit are irreconcilable on the following aspects: In para 6 of his counter, respondent No.2 relied on Rule 11 in stating that he is competent to grant privilege and respondent No.3 is competent to grant license. In taking this stand, he evidently lost sight of Rule 5 as amended in G.O.Ms.No.596 dated 26-5-2006 under which respondent No.2 is the licensing authority, though in the previous sentence of the same para he relied on the amended Rule and asserted that he is the licensing authority. Respondent No.2 claimed that he passed “the impugned proceedings vide Lr.No.921/2007/PE/B2, dated 9-1-2008 recommending the 2nd respondent to reject the application of the petitioner for grant of license” and further stated that the impugned proceedings was issued to avoid unhealthy competition. Indeed, the proceedings impugned in this Writ Petition are dated 7-2-2008 passed by Sri T.Arun Kishore, Deputy Commissioner of Prohibition & Excise (FAC) and not the alleged proceedings dated 9-1-2008 passed by Sri C.Jagadish Kumar Reddy, Deputy Commissioner, who filed the counter-affidavit. Though the impugned proceedings dated 7-2-2008 contains a reference to the proceedings dated 9-1-2008 of respondent No.2, there is no discussion on its purport or contents therein. A copy of the said proceedings is not placed by the respondents before this Court. The deponent of the counter-affidavit was obviously labouring under the confusion that his proceedings dated 9-1- 2008 are the subject matter of challenge in the present Writ Petition. By making conflicting statements in para 6 of the counter-affidavit on the authority competent to grant Form-2B license, he failed to reconcile between Rule 11 and Rule 5 as amended by G.O.Ms.No.596, dated 26-5-2006. On this premise he claimed that he recommended to respondent No.2 to reject the petitioner’s application for grant of Bar license. The fact, however, remains that the counter-affidavit is not filed with reference to proceedings dated 7-2-2008 by which the Deputy Commissioner, FAC, rejected the application for Bar license, which are actually impugned in this Writ Petition, though the substance of the counter in effect supports the reasoning contained in the said proceedings. Be that as it may, having carefully considered the above- mentioned order of respondent No.1, I am of the firm view that the same suffers from patent illegalities. Respondent No.1 is a Government Servant discharging the administrative and statutory functions entrusted to him. While discharging the administrative functions, he is bound by the executive policies of the State and while exercising the statutory powers, his discretion is limited within the permissible parameters of the statutory provisions. He has neither the power of policy making nor the power to legislate. As a Government Servant, he is bound to act within his designated areas in discharge of his both administrative and statutory functions. He has no brief to point out the lacunae either in the executive policies or in the existing laws. The discretion vested in him – whether to grant license or not – is thus limited by executive policies/legislative provisions as reflected in the existing laws in force. Respondent No.1 cannot import his personal views and thrust the same on the petitioner. But, regrettably he did exactly the same, which he is forbidden to do. The personal opinion of respondent No.1, which constitutes the sole basis for rejection of the petitioner’s application for license, is not sanctioned by law, because on respondent No.1’s own findings there is no prohibition on granting Bar License in the middle of the licensing year and equally there is no restriction on distance. Being part of governance under rule of law, whose primary meaning is that everything must be done according to law, respondent No.1 ignored this fundamental principle. H.W.R. Wade & C.F.Forsyth in Administrative Law, Seventh Edition, pithily stated: “Every act of governmental power, i.e., every act which affects the legal rights, duties or liberties of any person, must be shown to have a strictly legal pedigree. The affected person may always resort to the courts of law, and if the legal pedigree is not found to be perfectly in order the court will invalidate the act, which he can then safely disregard”. While referring to the exercise of discretionary power by the Government or its agencies, the authors quoted the judgment of more than 400 years old in Rooke’s case[1]. The said authors also quoted Lord Macnaghten in Westminster Corporation V. L & NW Railway[2], who held as under: “ It is well settled that a public body invested with statutory powers such as those conferred upon the corporation must take care not to exceed or abuse its powers. It must keep within the limits of the authority committed to it. It must act in good faith. And it must act reasonably. The last proposition is involved in the second, if not in the first”. According to Keir & Lawson[3], “many of the acts performed by public authorities or public officers are done in strict obedience to rules of statute or common law which impose on them a simple and definite duty in respect of which they have no choice”. The law is thus well settled that a statutory functionary shall not exercise the discretion beyond his statutory powers. While respondent No.1 went by his personal opinion he ignored the statutory provisions, which placed no restrictions on the grant of license during the middle of the year and on the distance between the two licensees. Even while seeking to impose his personal views he failed to take into consideration the facts on record. It is interesting to notice that though he made a reference to report dated 7-1-2008 of respondent No.3 in the reference part of his order, respondent No.1 failed to discuss the contents of the said report, a copy of which was filed by the petitioner, the authenticity of which is not in dispute. In the said report, respondent No.3 referred to the objections of the above mentioned four persons and mentioned as under: “ I have examined the objection of Sri P.Srinivas Reddy, licensee of A-4 Shop Gazette Sl.no.26 located in Division 36 of W.M.C. and objection of Sri G.Venkateswar Rao, licensee of A.4 shop Gaz.Sl.No.25 located in Division No.33 of W.M.C. These two A.4 shops are exclusive retail shops without permit room facility. As per rules these two licensees are permitted to conduct the sales in sealed receptacles and no sitting is permitted in the premises. The nature of conduct of business of 2-B Bar is entirely different from that of A.4 shops. In the case of Bar, liquor is served in loose to the customers, within the Bar premises only and whereas in the case of A.4 shops customers will not be allowed to consume liquor in the premises and customers have to purchase the liquor in sealed receptacles and take away to the place of choice for consumption. So it is difficult to draw up a conclusion that a proposed new bar being located at a distance of 1 K.M. and 400 Mtrs. from the above mentioned shops will effect their business”. (Emphasis added). He also gave the details of licence fees and the turnover achieved by the said licensees during the year 2006-07 and 2007-08 in a statement, which is extracted hereunder: Sl.No. N a m e of the Licensee Lease Year Annual Licence fee IML Sale value Turnover percentage over licence fees 1 2 3 4 5 6 1 P.Sateesh eddy,Licensee No.1, Delux Bar, Kazipet 2006-07 2007-08 Upto 12/07 16,00,000/- 18,40,000/- 96,66,421/- 45,98,619/- 600% 2 5 0 % ( f o r 6 months) 2 P.Geetha M/ s . Raj Kamal Rest. & Bar, Kazipet 2006-07 2007-08 Upto 12/07 16,00,000/- 18,40,000/- 93,49,422/- 44,89,571/- 584% 2 4 3 % ( f o r 6 months) 3. P.Srinivas Reddy A4 Shop Gaz.Sl.No.(26) 2006-07 2007-08 Upto 12/07 24,20,250/- 24,20,250/- 1,48,17,559/- 97,39,409/- 612% 4 0 2 % ( f o r 6 months) 4 G.Venkateshwar Rao, A.4 shop, Gaz.Sl.No.(25), M/s.Sai Ram Wines, Kazipet. 2006-07 2007-08 Upto 12/07 19,33,333/- 19,33,333/- 2,28,77,678/- 1,14,85,075/- 1183% 5 9 4 % ( f o r 6 months) On the basis of the above reproduced statement, respondent No.3 came to the opinion that all the four shops of the objectors are running on “higher profits”. Respondent No.3 further opined that all the existing three shops and the Bar are located on the main road of Kazipet and the petitioner is also proposing to locate the Bar on the same road and that Kazipet being part and parcel of Warangal Municipal Corporation having main Railway junction, there is considerable public floating every day and that there is viability for grant of a new Bar. It is indeed astonishing that respondent No.1, articulated eloquently on the need to change the rule position to introduce restrictions on grant of licenses during the middle of the licensing years, conveniently omitted