IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE A.K.BASHEER & THE HONOURABLE MR. JUSTICE P.Q.BARKATH ALI TUESDAY, THE 17TH AUGUST 2010 / 26TH SRAVANA 1932 WA.No. 604 of 2010() -------------------- AGAINST THE JUDGEMENT/ORDER IN WPC.9676/2010 .................... APPELLANT/ PETITIONER: -------------------------------------- K.P.SAXON, FL-3 LICENSEE, HOTEL VICTORY INN, KUNNAMKULAM. BY ADV. SRI.GEORGE POONTHOTTAM RESPONDENTS/ RESPONDENTS; --------------------------- 1. THE COMMISSIONER OF EXCISE, COMMISSIONERATE OF EXCISE, THIRUVANANTHAPURAM. 2. THE DEPUTY COMMISSIONER OF EXCISE, DIVISIONAL OFFICE, TRICHUR. BY SR. GOVT. PLEADER SRI. BASANT BALAJI SRI. P.B.KRISHNAN FOR R4 THIS WRIT APPEAL HAVING COME UP FOR ADMISSION ON 17/08/2010 ALONG WITH WA NO. 607 OF 2010, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: A.K. Basheer & P.Q. Barkath Ali, JJ. - - - - - - - - - - - - - - - - - - - - - - - - - - - - W.A. Nos.604 & 607 of 2010 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Dated this the 17th day of August, 2010 J U D G M E N T Basheer, J: These two appeals are directed against the common judgment passed by a learned single Judge in two writ petitions filed by the common appellant herein. 2. The crucial issue that came up for consideration before the learned single Judge was whether the Commissioner of Excise was justified in cancelling the licence issued in favour of the appellant to run a Bar in his hotel. The learned single Judge answered the above question in the affirmative. Hence these appeals. 3. Appellant was granted the Bar licence in Form FL3 initially in the year 1984-85. Appellant had been conducting a Bar on the strength of the said licence in his hotel in the name and style of “Victory Inn”. It is beyond controversy that the the licence was being renewed from year to year. 4. It is on record that in the year 2008 the appellant agreed to sell the hotel and the appurtenant land and other super structures situated in the property to respondent No.4 . An agreement to this effect was entered into between the parties. It is also beyond WA. Nos.604 & 607/2010 2 dispute that Ext.R4(a) and R4(b) sale deeds were executed by the appellant on December 17, 2008 and January 14, 2009 respectively, in favour of respondent No.4 pursuant to the sale agreement. 5. At the time of sale of the property, the FL3 licence issued in favour of the appellant was valid till March 31, 2009. It was agreed between the parties that the appellant would continue to run the Bar till the date of expiry of the licence, even though the immovable property had already been conveyed to respondent No.4 on the strength of the two assignment deeds referred to above. 6. On December 17, 2008 appellant and respondent No.4 entered into an “agreement” by which the appellant was allowed to continue in occupation of the Bar premises as a tenant for a period of 11 months starting from December 19, 2008. The appellant was bound to give vacant possession of the premises on the expiry of the period of 11 months. 7. As has been mentioned earlier, the licence issued in favour of the appellant was due to expire on March 31, 2009, even though the appellant had sold the hotel building and other structures belonging to him to respondent No.4 during December 2008 and WA. Nos.604 & 607/2010 3 January 2009. It is on record that shortly after the sale of the property by the appellant in favour of respondent No.4 and during the currency of the Bar licence in the name of the appellant, some dispute arose between the parties which resulted in institution of a suit by the appellant against respondent No.4 for a decree of prohibitory injunction. By order dated March 18, 2009 the Munsiff Court, Wadakkancherry restrained respondent No.4 from interfering with the peaceful conduct of the Bar by the appellant. It is not in dispute that the appellant got the licence renewed with effect from April 1, 2009 and continued to run the Bar in the same premises apparently on the strength of the “agreement” referred to above. 8. However on September 10, 2009 appellant was served with Ext.P5 notice issued by the Commissioner of Excise directing him to show cause why action should not be taken against him under Rule 34 of the Foreign Liquor Rules for “having sold the property including the building where FL3 licence was sanctioned without the consent of Commissioner of Excise”. A reply was sent by the appellant in response to the above show cause notice refuting the allegation of transfer of licence and contending, inter alia, that there was no WA. Nos.604 & 607/2010 4 violation of any of the conditions of licence. Ext.P6 is stated to be a true copy of the reply sent by the appellant to the show cause notice. 9. The Commissioner of Excise passed Ext.P8 order after hearing the appellant as well as respondent No.4 holding that the appellant had violated Rule 19(1) of the Foreign Liquor Rules “which is an offence actionable under Rule 34 of the Rules and Section 26 (b) of the Abkari Act”. 10. The above order was challenged by the appellant before the learned single Judge in W.P. No. 32988/09. Close on the heels of the above order, the Deputy Commissioner of Excise, Thrissur rejected the application filed by the appellant for renewal of the FL3 licence for the year 2010-2011. The said order dated March 20, 2010 was challenged by the appellant in W.P.No.9676/2010. 11. As has been noticed already, these two writ petitions were heard and disposed of by the learned single Judge by the impugned common judgment. 12. It may at once be noticed that there is no controversy as regards the conveyance of property comprising the hotel and other buildings situated in the land having an extent of 55 cents. The WA. Nos.604 & 607/2010 5 assignment of the property was in December 2008 and January 2009. At that relevant point of time the FL-3 licence issued by the Department in favour of the appellant was valid till March 31, 2009. That the appellant continued to run the Bar on the strength of the licence even after the assignment of the property is beyond dispute. Further, it is also the admitted position that the appellant entered into an agreement with respondent No.4, enabling him to continue in occupation of the hotel and Bar premises as a tenant on a monthly rent of Rs.10,000/-. A perusal of the so called “agreement”, a copy of which is available on record as Ext.P2, would show that it is essentially a lease deed which enabled the appellant to occupy the premises as a tenant, albeit the tenure of the lease was fixed as 11 months. 13. According to respondent No.4, it was only a permissive occupation that was granted to the appellant till such time steps were taken to transfer the Bar licence in his favour. However, the appellant got the Bar licence renewed for a further period of one year with effect from April 1, 2009 behind his back and against the understanding entered into between them. Further, going by the WA. Nos.604 & 607/2010 6 terms of the agreement entered into between the parties for the sale of the hotel and appurtenant land, it was incumbent on the appellant to get the licence transferred to the name of respondent No.4 to enable him to run the Bar with effect from April 1, 2009. This undertaking was violated by the appellant. Therefore respondent No.4 had approached the Commissioner of Excise requesting for appropriate action in accordance with law. This had culminated in Ext.P8 order issued by the Commissioner cancelling the FL3 licence issued in favour of the appellant. 14. But Sri.George Poonthottam learned counsel for the appellant points out that the Commissioner has proceeded to consider the issue at an apparently wrong tangent without really comprehending the tenor and gamut of the relevant provisions contained in the Act and the Rules. While conceding that he had sold the property belonging to him including the hotel building and other structures situated therein to respondent No.4 for adequate sale consideration as reflected in the registered documents, it is contended by the learned counsel that it was agreed between the parties that till such time the legal formality for transfer of licence was WA. Nos.604 & 607/2010 7 completed, the licensee viz., the appellant, will continue to run the Bar. It was for the said specific purpose that a lease deed was executed. It was on the strength of the said lease deed the appellant had occupied the premises as a tenant and continued to run the Bar strictly in conformity with the terms and conditions of the licence. Since the statutory formalities could not be completed before March 31, 2009, the appellant had to necessarily get the licence renewed for one more year. However respondent No.4 had some other idea. He approached the Commissioner of Excise and represented before him that the licence had already been transferred without the permission of the competent authority. It is submitted by the learned counsel that the Commissioner committed serious error in accepting the above contention raised by respondent No.4 without a proper understanding of the factual position. 15. The thrust of the argument of the learned counsel for the appellant is that there is no violation of condition No.13 of FL3 licence at all. The said condition postulates that licencee shall not lease out, sell or otherwise transfer his licence without the written consent of the Excise Commissioner. The above stipulation and the WA. Nos.604 & 607/2010 8 two provisos thereunder are essentially what have been laid down in Rule 19 of Foreign Liquor Rules also. 16. Sri. P.B.Krishnan, the learned counsel for respondent No.4, while inviting our attention to the agreement for sale of the property which preceded the two assignment deeds, points out that transfer of Bar licence from the name of the appellant to that of respondent No.4 was one of the essential terms of the entire sale transaction. It is true that in the agreement, a copy of which is available on record as Ext.R4(c), it was stipulated that on receipt of a total sum of Rs.5,50,00,000/- by the appellant from respondent No.4 on or before March 31, 2009, the latter will commence operation of the establishment with effect from April 1, 2009. It was further stipulated in Ext.R4(c), (which is more specific with regard to the actual transfer of the Bar licence) that respondent No.4 will pay the outstanding balance of Rs.25,00,000/- to the appellant after getting the Bar licence transferred in his name. Thus a reading of Ext.R4(c) agreement will unambiguously show that the appellant agreed to transfer the Bar licence in favour of respondent No.4. Still further, while referring to the total consideration for sale of the entire WA. Nos.604 & 607/2010 9 property, it had been specifically stated that the total sale consideration had been fixed for all the assets like land, hotel, bar, other buildings and electrical fittings etc including the Bar licence. Therefore, it will be idle for the appellant to contend for the position that he had not agreed to sell the Bar licence also to respondent No.4. 17. However to be fair to the appellant, he does not have a case that he did not agree to sell the licence. But his specific contention is that he has not transferred the licence without the prior consent of the Commissioner. Learned counsel therefore contends that so long as he has not leased out, sold or otherwise transferred the licence to anyone without the written consent of the Excise Commissioner, it cannot be said that he has violated condition No.13 or Rule 19 of the rules. There is considerable force in the above contention. 18. A perusal of the impugned order (Ext.P8) passed by the Commissioner will show what has been found objectionable by the Commissioner is the sale of the hotel where the Bar is being conducted. According to the Commissioner, since the appellant has WA. Nos.604 & 607/2010 10 sold the hotel without seeking or obtaining the consent of the Commissioner, he has violated condition No.13 and Rule 19(i) of the rules. More strangely, the Commissioner has referred to the period of lease/licence stipulated in Ext.P2 agreement under which the appellant was allowed to continue to occupy the premises on a monthly rent of Rs.10,000/-. It is true that in Ext.P2 agreement it has been stipulated that the right of occupancy will be for eleven months from the date of execution of the document and going by recitals therein, the period of occupancy would have ended on November 16, 2009. According to the Commissioner, the appellant would not be entitled to continue to occupy the premises and particularly to run the Bar beyond the date stipulated in the agreement. 19. The fact that the period of Bar licence had been renewed by the Deputy Commissioner of Excise till March 31, 2010 is beyond dispute. Therefore the appellant would have been entitled to run the Bar on the strength of the renewed licence up to its date of expiry, if it had not been revoked or cancelled in the meanwhile by the competent authority. But the Commissioner linked the validity of licence to the tenure of tenancy/occupancy. Thus a perusal of the WA. Nos.604 & 607/2010 11 impugned order passed by the Commissioner will undoubtedly show that he has proceeded to consider the issue from a totally erroneous and irrelevant angle. 20. However we hasten to add that we do not intend to express any opinion on the impact of the clause in Ext.R4(c) relating to transfer of the licence. We take note of the arguments advanced by learned counsel for respondent No.4 that parties had agreed on a price for the Bar licence as is evident from Ext.R4(c) agreement. The parties were also aware that there will be some legal and technical snag before which the licence could be transferred in the name of respondent No.4. The appellant promised that necessary steps would be taken to complete the formalities for transfer at the appropriate level after obtaining written consent form the competent authority. This process necessarily required some time and it was therefore agreed that the appellant would be allowed to run the Bar for some reasonable time within which the licence would be got transferred in the name of respondent No.4 in accordance with law. 21. If we consider the whole transaction between the parties starting from Ext.R4(c) agreement for sale ending with Ext.P2 lease WA. Nos.604 & 607/2010 12 deed (agreement) it is abundantly clear that the appellant had in no uncertain terms put a price tag on his licence and agreed to sell the same to respondent No.4. 22. The crucial question is whether the agreement for lease/sale/transfer of licence without written consent of the Excise Commissioner will attract the vice of Rule 19 or whether it will be in violation of condition No.13 of FL3 licence. 23. In our view, the Commissioner went wrong in failing to consider the above question in that perspective. We do not propose to consider the other provisions in the Act, Rules or conditions of licence at this stage. Suffice it to say that the Commissioner failed to consider the whole issue in its proper perspective keeping in view the tenor of the relevant rules governing the filed. 24. As regards the order passed by the Deputy Commissioner declining the request of the appellant to renew the licence, it has to be noticed that the said order was in fact a sequel to the order passed by the Excise Commissioner in Ext.P8. In the impugned order the Deputy Commissioner noted that FL3 licence had already been cancelled by the Commissioner since “the present owner of the WA. Nos.604 & 607/2010 13 property is not willing to give consent for running the Bar in the existing premises”. Since we have already found that the Commissioner of Excise has to reconsider the matter and pass appropriate order afresh, we do not propose to issue any specific direction in this regard though we set aside the order passed by the Deputy Commissioner. It is made clear that the right of renewal of the licence shall depend on the order that may be passed by the Commissioner on the fate of the licence. The Commissioner shall pass orders in the matter, after affording sufficient opportunity to the parties to be heard, as expeditiously as possible, at any rate, within four weeks from the date of receipt of a copy of this judgment. The writ appeals are disposed of with the above direction. A.K. BASHEER Judge. P.Q. BARKATH ALI Judge. vps WA. Nos.604 & 607/2010 14 WA. Nos.604 & 607/2010 15