K.P.SAXON V. THE COMMISSIONER OF EXCISE

WP(C)/32988/2009

AI Insights

The case revolves around the cancellation of an FL-3 licence held by K.P. Saxon for his hotel, Victory Inn, due to alleged violations related to the transfer of property and licence without proper consent. Saxon had entered into a sale agreement with the 4th respondent, K.K. Viswanathan, which included the transfer of the hotel and its licence. However, the licence was not officially transferred, leading to disputes and complaints. The Excise Commissioner cancelled the licence citing violations of the Foreign Liquor Rules and the Abkari Act, which Saxon contested in the High Court. The court's decision to uphold the cancellation was based on both the legal violations and the non-renewal of the lease agreement.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 727077 (HC-KERALA)
• Appeal Type: Others
• Pronouncement Date: 25-03-2010
• Assessment Year: misc
• Other Referred Cases: Commissioner of Excise v. Gopidas (2005(2) KLT S.N. Case No.101)
• Laws Referred To: Foreign Liquor Rules, Abkari Act
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: C S MANILAL; P B KRISHNAN; V MANU
• Assessee Lawyers: GEORGE POONTHOTTAM
• Keywords: Excise Commissioner; Injunction Order; Licence renewal; Show cause notice; FL-3 licence; Hotel ownership transfer
• Section: 13; 34; 19(I); 26(B)

Judgement Text

" IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE ANTONY DOMINIC THURSDAY, THE 25TH MARCH 2010 / 4TH CHAITHRA 1932 WP(C).No. 32988 of 2009(P) -------------------------- PETITIONER(S): ------------------------ K.P.SAXON, FL-3 LICENSEE,HOTEL VICTORY INN,KUNNAMKULAM. BY ADV. SRI.GEORGE POONTHOTTAM RESPONDENT(S): ------------------------ 1. THE COMMISSIONER OF EXCISE, COMMISSIONERATE OF EXCISE,THIRUVANANTHAPURAM. 2. THE DEPUTY COMMISSIONER OF EXCISE, DIVISIONAL OFFICE,TRICHUR. 3. THE CIRCLE INSPECTOR OF EXCISE, WADAKKANCHERY,TRICHUR DISTRICT. 4. SRI.K.K.VISWANATHAN, KALLAYIL HOUSE,CHERUVATHANI KARA, ANJOOR VILLAGE,KUNNAMKULAM, TRICHUR DISTRICT. ADV. SRI.C.S.MANILAL FOR R4 SRI.P.B.KRISHNAN FOR R4 GOVERNMENT PLEADER S RI.V.MANU FOR R1-3 THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 25/03/2010, ALONG WITH WPC NO.9676/10, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: WPC NO.32988/09 APPENDIX PETITIONER'S EXHIBITS EXT.P1: TRUE COPY OF THE LICENCE ISSUED TO THE PETITIONER. EXT.P2: TRUE COPY OF THE LEASE AGREEMENT DT 17.12.2008. EXT.P3: TRUE COPY OF THE INJUNCTION ORDER IN IA NO.642/09 IN OS NO.129/09 DT 18.3.2009. EXT.P4: TRUE COPY OF THE APPLICATION FOR RENEWAL SUBMITTED BY THE PETITIONER DT 24.3.2009. EXT.P5: TRUE COPY OF THE SHOW CAUSE NOTICE NO.XC6-6810/09 DT.10.9.2009. EXT.P6: TRUE COPY OF THE REPLY DT 10.10.09. EXT.P7: TRUE COPY OF THE HEARING NOTICE NO.XC6-6810/09 DT 2.11.2009. EXT.P8: TRUE COPY OF THE ORDER NO.XC6-6810/2009 DT.16.11.2009. EXTS OF R4 EXT.R4(a): A TRUE COPY OF THE SALE DEED DT 19.12.2008. EXT.R4(b): A TRUE COPY OF THE SALE DEED DT 14.1.2009. EXT.R4(c): A TRUE COPY OF THE AGREEMENT FOR SALE DTD.17.11.2008. //TRUE COPY// P.A. TO JUDGE Rp ANTONY DOMINIC, J. ================ W.P.(C) NOs. 32988 OF 2009 (P) & 9676 OF 2010 (H) ========================= Dated this the 25th day of March, 2010 J U D G M E N T Issues raised in these writ petitions are connected, and therefore, these cases were heard and are disposed of by this common judgment. 2. I shall first refer to the facts pleaded in W.P.(C)No.32988 of 2009. 3. The prayer sought in this writ petition is to quash Ext.P8 and consequential reliefs are also sought for. 4. Facts of the case are that the petitioner was the owner of 55 cents of land and the hotel situated therein, known as Victory Inn, Kunnamkulam. On 17.11.2008, he entered into Ext.R4(c) agreement for sale with the 4th respondent agreeing inter alia to sell the land, building and the FL-3 licence for a total consideration of Rs.5.5 crores. In this agreement receipt of Rs.2.75 crores already paid is acknowledged by the petitioner. In so far as it is relevant, Ext.R4(c) agreement reads as under: WPC Nos. 32988/09 & 9676/10 :2 : അപ\u0003ക\u0005ര\u0007 ത റ വ\u000eലയ\u000eല രണ കക\u0005ട\u000e എഴ \u0003തഞ ലക\u0007 ഉറ പ\u000eക 15.12.2008ന# ഒന\u0005\u0007\u0003\u0005ര'\u000eക# ക\u000e'\u000e ക)\u0005ദ+പപ' കഴ\u000eഞ\u0005ല ക.ല\u0003റഞ 55പ/ന#റ# വഹകള \u0007 പക'\u000eടങള \u0007 ഒന\u0005\u0007\u0003\u0005ര'\u000e രണ\u0005\u0007\u0003\u0005ര'\u000eയ പടകയ\u0005 രണ\u0005\u0007\u0003\u0005ര'\u000e ന\u000eരക4ശ\u000eക നവര പടകയ\u0005 ക\u0003ര\u000eല ത റ \u0007 കകവശവ \u0007 പക\u0005ട കകണത \u0007 ആയത\u000eന# വര ന ച\u000eലവ കള രണ\u0005\u0007\u0003\u0005ര'\u000e വഹ\u000eകകണത \u0007 ആക ന . ത റ വ\u000eലയ\u000eല ക.ലപ\u0003ക\u0005ര. ള രണ കക\u0005ട\u000e എഴ \u0003തഞ# ലക\u0007 ഉറ പ\u000eകകഴ\u000eച# രണ കക\u0005ട\u000e അ\u0007\u0003ത# ലക\u0007 ഉറ പ\u000eക 2009 .\u0005രച#31- ത യത\u000eകക\u0005 അത\u000eന ള\u000eകല\u0005 രണ\u0005\u0007\u0003\u0005ര'\u000e ഒന\u0005\u0007\u0003\u0005ര'\u000eക# പക\u0005ട ത# ക)\u0005ദ+പപട കതണത \u0007 01/04/2009. തല ട\u000e സ\u0005\u0003ന\u0007 രണ\u0005\u0007\u0003\u0005ര'\u000e ത റന# പ\u0003വരത\u000eക നത \u0007 ആക ന . ട\u000e )\u0005ര കല/ന/# ഒന\u0005\u0007\u0003\u0005ര'\u000eയ പട ക\u0003ര\u000eലന\u000eന \u0007 രണ\u0005\u0007\u0003\u0005ര'\u000eയ പട ക\u0003ര\u000eകലക# .\u0005റ\u000e ക\u000e' ന /.യത# )\u0005ക\u000eയ ള 2500000ക (ഇര \u0003തഞ# ലക\u0007 ഉറ പ\u000eക) രണ\u0005\u0007\u0003\u0005ര'\u000e ഒന\u0005\u0007\u0003\u0005ര'\u000eക പക\u0005ട ത#ക)\u0005ദ+പപട കതണത\u0005പFന# ന\u000eശയ\u000eച\u000eര\u000eക ന . 2009 .\u0005രച# 31 ത യത\u000eവപര ട\u000e സ\u0005\u0003നത\u000eപI പ/യ\u000eല/#ട\u0005ക#/# ഇനക\u0007ട\u0005ക#/#, എക#ക//# ക\u000e/#ത# . തല\u0005യത കള അവ/\u0005ന\u000eപ\u000eച \u0007 , എല\u0005 )\u0005ദ+തകളK\u0007 ഒത ക\u000eയ \u0007 ന\u000eലവ\u000eല ള എല\u0005 ജ വനക\u0005പരയ \u0007 ഒഴ\u000eവ\u0005ക\u000eയ \u0007 പക\u0005ട ക വ\u0005ന ഒന\u0005\u0007\u0003\u0005ര'\u000e ഉതരവ\u0005ദപപ'\u000e' ളത\u0005ക ന . 2009 ഏപ\u0003\u000eല 1- ത യത\u000e . തലക ള പ/യ\u000eല/#ട\u0005ക#/# . തല\u0005യത കള രണ\u0005\u0007\u0003\u0005ര'\u000e അടക വ\u0005ന )\u0005ദ+തപപ'\u000e' ളത\u0005ക ന . 5. On 17.12.2008, the petitioner and the 4th respondent entered into Ext.P2 lease agreement, by which the building where Hotel Victory Inn was established, was agreed to be leased out to the petitioner for a period of 11 months from 19.12.2008 for a WPC Nos. 32988/09 & 9676/10 :3 : monthly rent of Rs.10,000/-. Thereafter, on receipt of the agreed sale consideration, Ext.R4(a) sale deed was executed by the petitioner and his wife as “sellers” on 19.12.2008, in favour of the 4th respondent as the “purchaser” whereby the land, building and other appurtenant structures along with all the privileges, easements etc., were sold to the 4th respondent for the mutually agreed consideration. Ext.R4(b) is another sale deed between the parties, which is not of relevance to the controversy arising in this writ petition. Therefore exempting Rs.25 lakhs payable on transfer of the FL-3 licence, balance sale consideration of Rs.5.25 crores has been received by the petitioner. 6. It would appear that the petitioner did not get the FL-3 licence transferred to the 4th respondent. During March 2009, the petitioner filed O.S.No.129/09 before the Munsiff's Court, Wadakkancherry seeking a decree of permanent injunction against the 4th respondent and his men. In that suit, petitioner filed IA No.642/09 in which Ext.P3 order was passed by the Munsiff's Court on 18.03.2009 restraining the 4th respondent and his men from interfering with the functioning of the hotel WPC Nos. 32988/09 & 9676/10 :4 : mentioned above. While matters stood as above, as the period of Ext.P1, the FL-3 licence, was to expire on 31.03.2009, the petitioner submitted Ext.P4 application for renewal of the FL-3 licence for the year 2009-10. Neither Ext.P4, the covering letter nor the enclosures to the renewal application contain anything to show that the petitioner had disclosed about the alienation of the licenced premises or the agreement to transfer the licence to the 4th respondent. It would appear from the pleadings that based on the complaints made by the 4th respondent, objections were raised against renewing the licence. However, petitioner contended that he being the lessee in possession, was entitled to have the licence renewed even without the consent of the landlord. Accordingly, the licence was got renewed under the orders of the Assistant Excise Commissioner, Trichur. 7. Subsequently, the complaints made by the 4th respondent were forwarded to the Commissioner of Excise and acting upon the complaints, Ext.P5 show cause notice was issued to the petitioner. This notice makes reference to the report of the Deputy Excise Commissioner of Trichur, that the petitioner had admitted that the land and building of the hotel had been WPC Nos. 32988/09 & 9676/10 :5 : sold to the 4th respondent and that prior permission of the Commissioner was not obtained. It was further alleged that as per the Sale Deed, the petitioner had agreed to sell the property with FL-3 licence without obtaining permission, which was a violation of the licence condition and the Rules. On this basis, it was alleged that the petitioner was liable to be proceeded under Rule 34 of the Foreign Liquor Rules. On receipt of Ext.P5, petitioner filed Ext.P6 reply denying the allegations and contending that though the property was transferred, he had not transferred the licence and therefore, there is no violation of the licence condition or the Rules. In the meantime, the 4th respondent who had paid Rs.5.25 crores and was not transferred the hotel as agreed, continued to make complaints against the petitioner and seeking cancellation of the FL-3 licence. 8. The 4th respondent had also filed a writ petition before this Court as W.P.(C)No.27227/09 which was disposed of by judgment dated 29.09.2009 directing the Commissioner of Excise to finalise the proceedings against the petitioner. Accordingly, Ext.P7 notice of hearing was issued, parties were heard on 12.11.2009 and the Commissioner of Excise issued Ext.P8 order WPC Nos. 32988/09 & 9676/10 :6 : dated 16.11.2009 cancelling the licence issued to the petitioner. The concluding portion of Ext.P8 order reads as under; I have carefully considered the facts of the case with reference to the arguments advanced and the evidence adduced by the parties. On examination of the evidence, I am prompted to find that the respondent has sold the hotel where the Bar M/S. Victory Inn is functioning to the petitioner without seeking or obtaining the consent of the Commissioner of Excise. Thus he has violated Condition No.13 in the Form of licence and Rule 19(i) of the Foreign Liquor Rules which are offences actionable under Rule 34 of Foreign Liquor Rules and Section 26(b) of the Abkari Act. As per the agreement entered into between the parties the respondent can run the bar only till 16.11.2009. Therefore I find substance and force in the argument of the petitioner that the licence is liable to be cancelled on expiry of the agreement between the parties. Therefore the Bar licence No.TSR-2 issued to Victory Inn, Kunnamkulam is hereby cancelled on expiry of the agreement period. The Deputy Commissioner of Excise, Thrissur will enforce this order. It is challenging this order the writ petition and on the basis the interim order passed by this Court, the petitioner continued the business and the licence period is expiring on 31.03.2010. 9. It can be seen from Ext.P8 that cancellation of the licence has been ordered on two grounds. One is that the petitioner violated Condition No.13 the licence and Rule 19(i) of the Foreign Liquor Rules, which is actionable under Rule 34 of the Foreign Liquor Rules and Section 26(b) of the Abkari Act. The second reason stated is that as per Ext.P2 lease agreement WPC Nos. 32988/09 & 9676/10 :7 : between the parties, the petitioner could run the bar only till 16.11.2009 and on account of the expiry of the agreement between the parties, licence is liable to be cancelled. 10. The learned counsel for the petitioner commenced his submissions contending that though violation of Condition No.13 of the licence found against him was held actionable under Rule 34 of the Foreign Liquor Rules and Section 26(b) of the Abkari Act, cancellation of the licence was only on the ground of expiry of the period of the lease between the parties. Having read the concluding portion of Ext.P8 order, which is extracted in paragraph 8 herein above, I do not find my way to accept this contention. A reading of the aforesaid paragraph of Ext.P8 itself show that the Commissioner found that the petitioner violated Condition No.13 and Rule 19(i) of the Foreign Liquor Rules and held such violation actionable under Rule 34 of Foreign Liquor Rules and Section 26(b) of the Abkari Act. After entering into such a finding, Commissioner found that the lease period has also expired. It is thereafter that the licence was ordered to be cancelled. Therefore, cancellation was for both these reasons and it will be incorrect to hold that the Commissioner after having WPC Nos. 32988/09 & 9676/10 :8 : found violation of Condition No.13 and Rule 19(i) of the Foreign Liquor Rules omitted to proceed against the petitioner on this ground. 11. Condition No.13 incorporated in Form FL-3 prescribed in the Foreign Liquor Rules provide that “the licensee shall not lease out, sell or otherwise transfer his licence without the written consent of the Excise Commissioner”. Rule 34 of the Foreign Liquor Rules provide that infraction of any of the rules or conditions of licence shall entail in the imposition of fine or cancellation of licence or both. According to the learned counsel for the petitioner, what has been transferred is only the land and the building, and that although there was an agreement for its transfer, the licence in question has not been transferred. It is pointed out that the agreement between the parties was to transfer the licence only after obtaining consent of the Excise Commissioner and that such consent was not obtained and therefore the licence was not transferred. On this basis, it was argued that Condition No.13 or Rule 19(i) have no application to the facts of this case. 12. However, learned counsel for the 4th respondent placed WPC Nos. 32988/09 & 9676/10 :9 : considerable reliance on Ext.R4(c) the agreement between the parties the relevant portion of which has been extracted in paragraph 8 of this judgment. A reading of the aforesaid provision of the agreement shows that the agreement between the parties was that even if the licence was to not transferred from the name of the petitioner, the 4th respondent will be put in possession of the licenced premises and will carry on the business w.e.f. 01.04.2009. The agreement also provides that the petitioner shall settle the statutory liabilities upto 01.04.2009. It seems factual that the petitioner did not put the 4th respondent in possession as agreed and that after having paid Rs.5.25 crores, he had to be contented with the rent of Rs.10,000/- payable under the lease deed. Although this agreement was not performed by the petitioner and he did not part with the possession of the licensed premises, still, fact remains that the petitioner had agreed to transfer the licence in favour of the 4th respondent and it on this agreement that he received payment of the sale consideration from the 4th respondent. Therefore, if not a physical transfer, atleast an attempt to transfer, admittedly has taken place by virtue of Ext.R4(c) agreement entered into WPC Nos. 32988/09 & 9676/10 :10 : between the parties. Question is whether the licence is liable for cancellation in such circumstances. It is in this context that the counsel for the 4th respondent has relied on the judgment of the Division Bench of this Court in Commissioner of Excise v. Gopidas (2005(2) KLT S.N. Case No.101). This judgment was rendered in the context of renewal of the licence of a toddy shop, in which case also, Condition No.23 of the General Conditions applicable to Toddy Shops contained in Chapter VI of the Abkari Shops Disposal in Auction Rules imposes an absolute prohibition on sale or transfer of the privilege. This judgment reads as follows: Only if a valid licence exists then only the question of renewal arises. The manner in which licensee had conducted the toddy shop during the previous year, in our view, has considerable relevance for its renewal. Renewal of licence is not automatic. Several factors would influence the mind by the officers while renewing the licence. The manner in which the licensee had conducted the shop during the previous years including the question as to whether there was any attempt by the licensee to sell or transfer the privilege, to lease out or sublet the privilege granted during the previous years has considerable relevance in its renewal. Condition 23 of the licence stipulates that the licensee shall not sell or otherwise transfer the privilege granted or licence issued to him and no licence shall lease out or sublet the whole or any portion of the privilege or licence granted to him. Further notification dated 25.3.2003 was issued by the Government in exercise of the powers conferred under S.18-A of the Abkari Act read with sub-r.(1) of R.3 of the Kerala Abkari Shops Disposal Rules, 2002. Excise Commissioner has not only the right but an obligation under S.26(b) to (e) read with R.5(15) of the Abkari Shops Disposal Rules and Condition No.11 of the notification dated 25.3.2003 to examine the conduct of the WPC Nos. 32988/09 & 9676/10 :11 : licensee and whether the licensee had misused the licence. Learned Single Judge held that unless and until there is cancellation or suspension of the licence for the year 2002-2003 for any of the violation of the conditions of licence, Excise Commissioner is bound to renew the licence for the year 2003- 2004 is an over statement of law. Renewal of the licence itself is discretionary and conditional. Several factors have to be borne in mind before renewing the licence. The mere fact that the petitioner was granted licence for the previous year 2002-2003 is not a ground to hold that the licensee has the right to get the licence renewed. Trading is liquor licence to make unlawful gain is a strong circumstance to refuse renewal of licence. Suppression of material facts is also a strong ground to deny renewal of licence. Renewal of licence is always discretionary. The Court will not interfere unless the authorities have acted mala fide or on extraneous reasons. Suppression of material facts and non-production of relevant documents are also circumstances which would guide the mind of the authority at the time of renewing the licence. Every action of the public authority or the person acting in public interest or any act that gives rise to public element should be guided by public interest. The Excise Commissioner while dealing with the renewal of an abkari licence has got the freedom to refuse renewal if there is evidence to show that the licence had history of trading with the licence for unlawful gain. A reading of the above judgment shows that renewal of a licence is not automatic and the manner in which the licensee has conducted the shop during the previous years including the question as to whether there was any attempt to sell or transfer the privilege is a relevant consideration to be taken into account at the time when renewal is sought for. Having regard to the fact that Condition No. 13 mentioned above is similar to Rule 19 of the Foreign Liquor Rules and that in both cases power of cancellation exercised is under Section 26(b) of the Abkari Act, WPC Nos. 32988/09 & 9676/10 :12 : the principles laid down in this judgment is applicable to this case also. If that be so, I should agree with the counsel for the 4th respondent that the Commissioner cannot be faulted for the view that he has taken in Ext.P8 order. 13. The other reason stated in Ext.P8 is that the lease period had expired and therefore the licence should be cancelled with effect from the expiry of the agreement between the parties. It is a fact that Ext.P2 lease agreement was only for a period of 11 months from 19.12.2008 and that the period therefore had expired. Contention raised by the petitioner is that even if the lease period had expired, being a statutory tenant, he is entitled to have the licence renewed. However, a reading of Ext.P4 renewal application the impugned order and the counter affidavit show that the petitioner got the licence renewed, suppressing alienation of the property including the FL-3 licence and the lease in his favour. In other words, as in the previous years, he applied for renewal and got the licence renewed. If that be the case suppression of material facts itself will justify cancellation of the licence. 14. Apart from all the above, in this writ petition, the main WPC Nos. 32988/09 & 9676/10 :13 : prayer sought by the petitioner is for a writ of certiorari to quash Ext.P8 order. Certiorari is a discretionary relief and is not issued merely because it is lawful do so. On the other hand, by the impugned action if justice has been done or if injustice is not caused or if interference will result in the revival of an illegality, this court will justifiably decline to issue such a prerogative writ. (vide Champalal Binani v. Commr. of Income Tax, West Bengal and Others (1971 (3) SCC 20), Chandra Singh and Others v. State of Rajasthan and Others (2003 (6) SCC 545) and Rameshan v. Jayavally (2007 (2) KLT 325) In this case, admitted facts are that the petitioner has received an amount of Rs.5.25 crores from the 4th respondent and should have delivered the premises to him w.e.f. 01.04.2009. Without doing that, he got the FL-3 licence renewed and is conducting the business. It is this licence which has been cancelled by the respondents. By no stretch of imagination can this court hold that Ext.P8 order has caused any injustice warranting the issuance of a writ of certiorari to quash Ext.P8 order. 15. For these reasons, WP(C) No.32988/2009 is dismissed. In so far as W.P.(C)No. 9676/2010 is concerned, the WPC Nos. 32988/09 & 9676/10 :14 : challenge in the writ petition is against Ext.P6 order, wherein the licence of the petitioner was declined to be renewed for 2010- 2011 relying on Ext.P8 referred to above. Now that Ext.P8 order has been upheld, necessarily, Ext.P6 order herein also has to be upheld. Therefore, this writ petition is also to be dismissed and I do so. Writ petitions are dismissed. No costs. ANOTNY DOMINIC, JUDGE Rp "