State of
Kerala & ANR. Vs. M/S. B. Six Holiday Resorts (P) Ltd. & Ors [2010] INSC
161 (13 January 2010)
Judgment
IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 983-990 OF
2003 STATE OF KERALA & ANR. ... APPELLANTS WITH CIVIL APPEAL NO. 998/2003
B. SIX HOLIDAY RESORTS (P) LTD. ... APPELLANT WITH CIVIL APPEAL NOS.
999-1003/2003 KRISHNA REGENCY & ETC. ... APPELLANTS
O R D E R
R.V.
Raveendran, J.
1.
The appeals relate to non-grant of FL-3 Licence under the Foreign
Liquor Rules (`the rules' for short) framed under the Akbari Act. The appeals
arise from the common 2 judgment dated 16.7.2002 of the Kerala High Court in a
batch of cases wherein the amendment dated 20.2.2002 to Rule 13(3) of the Rules
and consequential rejection of applications for FL-3 licences were challenged.
CA Nos. 983-990 of 2003 are filed by the State and the other appeals are by the
applicants for FL-3 licences.
2.
for convenience, we will refer to the facts of the case of M/s.
B.Six Holiday Resorts (P) Ltd. (referred to as `the applicant' for short), who
is the respondent in C.A. No. 983 of 2003 and the appellant in C.A. No. 998 of
2003.
3.
The applicant constructed a resort hotel at Munnar.
The
applicant's restaurant therein was classified by the Ministry of Tourism,
Government of India, as an approved restaurant. On 11.12.2000, the applicant
made an application for a FL-3 licence under the Rules. As the said application
was not considered, the applicant approached the High Court. The High Court,
disposed of the writ petition (O.P.No.824/2001) by order dated 9.1.2001 with a
direction to the excise authorities to consider and dispose of the application
within three weeks. The application was considered and rejected by order dated
19.5.2001 on the ground that the Managing Director of the applicant had been
convicted in an excise offence. The said rejection was 3 challenged in O.P. No.
17106/2001 contending that the person convicted was not the Managing Director
when the application was made. The second writ petition was allowed on
20.6.2001 with a direction to re-consider the application and pass a fresh
order, taking note of the fact that the convicted Managing Director was no
longer in office and there was new Managing Director at the time of the application.
The Special Secretary (Taxes), Government of Kerala, reconsidered the
application and by order dated 6.10.2001 rejected the application on following
four grounds: (i) the applicant was not a classified restaurant as contemplated
under Rule 13(3) of the Rules; (ii) the facilities contemplated under Rule
13(3) were not available in the applicant's hotel; (iii) only hotels run by
Kerala Tourism Development Corporation and India Tourism Development
Corporation were entitled to FL-3 licences; and (iv) the current policy of the
government was not to grant any fresh licences. The applicant filed yet another
writ petition (O.P. No. 31993/2001) challenging the rejection. A learned Single
Judge dismissed it by order dated 6.11.2001.
He held
that though the first three grounds of rejection were not tenable, in view of
policy of the Government not to grant FL-3 licences for the time being, a
mandamus could not be issued to the State Government to grant a licence 4
contrary to its policy. The writ appeal filed by the applicant was allowed on
14.12.2001. The Division Bench of the High Court agreed with the learned single
Judge that the first three grounds of rejection were not tenable. In regard to
the fourth ground of rejection, the division bench felt that the policy put
forth, was rather vague and the Government cannot abdicate its function under
the Rules to consider and grant licences, by alleging some vague policy. It
therefore directed the Excise Commissioner to decide the applicant's
application for FL-3 licence within two weeks by a speaking order.
4.
Thereafter, the applicant gave a representation dated 19.12.2001.
The Excise Commissioner considered it and again rejected the application on
27.12.2001 on the ground that the applicant's hotel was only a restaurant
approved by Ministry of Tourism, Government of India, but it was not a
classified restaurant (two star and above) as required under Rule 13(3).
Feeling aggrieved, the applicant initiated contempt proceedings. The High Court
on being informed that a new Excise Commissioner had taken charge, granted an
opportunity to the new incumbent to reconsider the matter and pass a fresh
order by 22.2.2002. At that stage, by notification dated 20.2.2002, the Foreign
Liquor 5 Rules were amended by foreign Liquor (Amendment) Rules, 2002, with
retrospective effect from 1.7.2001. By the said amendment, the last proviso
under sub-Rule (3) of Rule 13 was substituted by the following proviso:
"Provided
that no new licences under this Rule shall be issued."
The
notification contained the following explanatory note to indicate the purpose
of the amendment:
"Government
have decided as its policy not to grant any new FL-3 Hotel (Restaurant)
Licences and also decided not to renew any defunct licences of the above
category with effect from 1.7.2001 until further orders.
In order
to carry out the above decision, necessary amendments have to be made in the
relevant rules"
On the
same date, i.e. 20.2.2002, the Excise Commissioner considered the application
of the applicant and again rejected the request for grant of licence in view of
proviso to the amended rule, prohibiting grant of new licences.
5.
The applicant challenged the amendment to the Rule and the
consequential rejection of its application in O.P. No. 7112 of 2002. The said
writ petition (along with other writ petitions and writ appeals involving
similar issue) were 6 disposed of by the impugned order dated 16.7.2002. The
High Court considered the following four grounds of challenge:
(a) that
the repeated rejection of the application by the Excise department and the
amendment of the Rules by notification dated 20.2.2002 were unreasonable,
arbitrary and was in bad faith and was, therefore, liable to be interfered; (b)
that the proviso to Rule 13(3) was invalid as it was violative of the main
Rule; (c) that the amendment to the Rules by notification date 20.2.2002, was
bad as it was made merely get over the judgment of the High Court directing
fresh consideration; and (d) that giving retrospective effect to the Rules was beyond
the rule making power of the State Government under the Act. The High Court
rejected the ground (a),(b) and (c) and upheld the validity of the amendment.
It however accepted ground (d) and declared that the retrospective effect given
to the last proviso to Rule 13(3) added by notification dated 20.2.2002 was
illegal and unenforceable and that the amendment would be effective only
prospectively from the date of issue, that is with effect from 20.2.2002. As a
consequence, the court directed the excise authorities to consider the
application dated 19.12.2001 (preceded by application dated 11.12.2000)
submitted by the applicant (and reiterated on 19.12.2001) on the basis of the
rules as 7 were operative as on 19.12.2001. In other words, the High Court held
that the application had to be considered with reference to the rules as they
existed on the date of application and not on the date of consideration of the
application.
6.
The State has challenged the said judgment rendered in the case of
the applicant and other similar matters in the first batch of appeals (CA Nos.
983 to 990 of 2003). The State has accepted the finding of the High Court that
the retrospective operation of the rules is bad and that the amendment should
be given effect only prospectively. But it is aggrieved by the direction that
the applications filed by the applicants for FL-3 licences should be considered
on the basis of the rules as they stood on the date of application. It is
submitted by the State that the Court ought to have directed the applications
for FL-3 licences to be considered with reference to the rules in force when
the application was considered.
7.
The applicant, as also other restaurateurs whose applications for
FL-3 licences made in the years 2000 and 2001 were also rejected, have
challenged the decision of the High Court upholding the validity of the
amendment and 8 non-grant of licence in CA No. 998 of 2003 and CA Nos. 999-
1003 of 2003.
8.
Two issues arise for consideration on the contentions urged:
(i)
Whether an application for grant of FL-3 Licence should be considered with
reference to the Rules as they existed when the application was made or in
accordance with the Rules in force on the date of consideration? (ii) Whether
the amendment to Rule 13(3) of Foreign Liquor Rules substituting the last
proviso is valid? Re : Question (i)
9.
This question is directly covered by the decision of this Court in
Kuldeep Singh v. Govt. of NCT of Delhi (2006) 5 SCC 702 relating to grant of
licences for sale of Indian made foreign liquor. This Court held:
"It
is not in dispute that the State received a large number of applications. It
was required to process all the applications. While processing such
applications, inspections of the proposed sites were to be carried out and the
contents thereof were required to be verified. For the said purpose, the
applications were required to be strictly scrutinized. Unless, therefore, an
accrued or vested right had been derived by the 9 Appellants, the policy
decision could have been changed. What would be an acquired or accrued right in
the present situation is the question.
x x x x x
x x x In case of this nature where the State has the exclusive privilege and
the citizen has no fundamental right to carry on business in liquor, in our
opinion the policy which would be applicable is the one which is prevalent on
the date of grant and not the one, on which the application had been filed. If
a policy decision had been taken on 16.9.2005 not to grant L-52 licence, no
licence could have been granted after the said date.
10.
We may in this context refer to some earlier decision laying down
the principle that applications for licences have to be considered with
reference to the law prevailing on the date of consideration.
10.1) In
State of Tamil Nadu v. Hind Stone & Ors. (1981 (2) SCC 205), this Court
considered the validity of government action in keeping applications pending
for long and then rejecting them by applying a rule subsequently made. This
Court while holding that such action is not open to challenge observed:
"The
submission was that it was not open to the Government to keep applications for
the grant of leases and applications for renewal pending for a long time and
then to reject 10 them on the basis of Rule 8C notwithstanding the fact that
the applications had been made long prior to the date on which Rule 8C came into
force. While it is true that such applications should be dealt with within a
reasonable time, it cannot on that account be said that the right to have an
application disposed of in a reasonable time clothes an applicant for a lease
with a right to have the application disposed of on the basis of the rules in
force at the time of the making of the application. No one has a vested right
to the grant or renewal of a lease and none can claim a vested right to have an
application for the grant or renewal of a lease dealt with in a particular way,
by applying particular provisions. In the absence of any vested rights in
anyone, an application for a lease has necessarily to be dealt with according
to the rules in force on the date of the disposal of the application despite
the fact that there is a long delay since the making of the application".
10.2) We
may next refer to the decision in Union of India & Ors. V. Indian Charge
Chrome & Anr. (1999) 7 SCC 314 wherein this Court held:
"Mere
making of an application for registration does not confer any vested right on
the applicant. The application has to be decided in accordance with the law
applicable on the date on which the authority granting the registration is
called upon to apply its mind to the prayer for registration."
11.
The applicant contended that it had a vested right because of the
several time-bound orders of the High Court and those orders were deliberately
floated by the 11 Excise authorities. An identical contention was rejected by
this Court while considering the issue with reference to sanction of a licence
under the Building Rules, in Howrah Municipal Corporation v. Ganges Rope
Co.Ltd. (2004 (1) SCC 663). This Court held:
"Neither
the provisions of the Act nor general law creates any vested right, as claimed
by the applicant company for grant of sanction or for consideration of its
application for grant of sanction, on the then existing Building Rules as were
applicable on the date of application.
Conceding
or accepting such a so-called vested right of seeking sanction on the basis of
unamended Building Rules, as in force on the date of application for sanction,
would militate against the very scheme of the Act contained in Chapter XII and
the Building Rules which intend to regulate the building activities in a local
area for general public interest and convenience. It may be that the
Corporation did not adhere to the time limit fixed by the court for deciding
the pending applications of the company but we have no manner of doubt that the
Building Rules with prohibition or restrictions on construction activities as
applicable on the date of grant or refusal of sanction would govern the subject
matter and not the Building Rules as they existed on the date of application
for sanction. No discrimination can be made between a party which had
approached the court for consideration of its application for sanction and
obtained orders for decision of its application within a specified time and
other applicants whose applications are pending without any intervention or
order of the court.
x x x x x
x x x The context in which the respondent Company claims a vested right for
sanction and which has been accepted by the Division Bench of the High Court,
is not a right in relation to 12 "ownership or possession of any
property" for which the expression "vest" is generally used.
What we
can understand from the claim of a "vested right" set up by the
respondent Company is that on the basis of the Building Rules, as applicable to
their case on the date of making an application for sanction and the fixed
period allotted by the Court for its consideration, it had a
"legitimate" or "settled expectation" to obtain the
sanction.
In our
considered opinion, such "settled expectation", if any, did not
create any vested right to obtain sanction. True it is, that the respondent
Company which can have no control over the manner of processing of application
for sanction by the Corporation cannot be blamed for delay but during pendency
of its application for sanction, if the State Government, in exercise of its
rule-making power, amended the Building Rules and imposed restrictions on the
heights of buildings on G.T. Road and other wards, such "settled
expectation" has been rendered impossible of fulfilment due to change in
law. The claim based on the alleged "vested right" or "settled
expectation" cannot be set up against statutory provisions which were
brought into force by the State Government by amending the Building
Rules...................................."
12.
Where the Rule require grant of a licence subject to fulfillment
of certain eligibility criteria either to safeguard public interest or to
maintain efficiency in administration, it follows that the application for
licence would require consideration and examination as to whether the
eligibility conditions have been fulfilled or whether grant of further licences
is in public interest. Where the applicant for licence does not have a vested
interest for grant of licence and where grant of licence depends on 13 various
factors or eligibility criteria and public interest, the consideration should
be with reference to the law applicable on the date when the authority
considers applications for grant of licences and not with reference to the date
of application.
13.
The applicant submitted that it had originally filed an
application on 11.12.2000 and in pursuance of the decision of the High Court on
14.12.2001, it submitted an application on 19.12.2001 and that application was
considered and disposed of on 27.12.2001. The applicant contended that even if
the principle laid down in Kuldeep Singh was applied, the application having
been considered and disposed of by the concerned authority on 27.12.2001, the
law in force on that day ought to have been applied.
The
applicant further contended that the amendment to the rules which came into
effect only on 20.2.2002, was not applicable on 27.12.2001 and therefore the
rejection on 27.12.2001 was bad and consequently the impugned order of the High
Court may be construed as requiring the authority to decide the matter as on
27.12.2001. We find that the said contention does not have any merit. It is
true that the application was given on 19.12.2001. It is true that the
application was considered and rejected on 27.12.2001 14 on a ground which may
not be sound. It is also true that the amendment to the rules which was
introduced by notification dated 20.2.2002 was not in force or effect on
27.12.2001. But the said order dated 27.12.2001 was neither challenged nor set
aside by the High Court. The applicant chose to file a contempt application
alleging that the excise authorities had disobeyed the order dated 14.12.2001.
In the contempt case, the High Court made an order on 12.2.2002 that the new
Excise Commissioner should pass an order on the application. Therefore the only
question is whether the order passed by the Excise Commissioner on 20.2.2002
was in accordance with the Rules as they stood on 20.2.2002. Under the amended
rules, no new FL-3 licence could be issued. Consequently, the rejection of the
application by order dated 20.2.2002 was in accordance with the rules and
cannot be faulted.
14.
Learned counsel appearing for the applicant next contended that
the decision in Kuldeep Singh was not with reference to any statutory rules,
but with reference to a policy of the executive and therefore inapplicable. We
find no force in this argument. It is true that in that case there were no
statutory rules and what was considered was with reference to a policy. But the
ratio of the decision is that where licence sought related to the business of
15 liquor, as the State has exclusive privilege and its citizens had no
fundamental right to carry on business in liquor, there was no vested right in
any applicant to claim a FL-3 licence and all applications should be considered
with reference to the law prevailing as on the date of consideration and not
with reference to the date of application. Whether the issue relates to
amendment to Rules or change in policy, there will be no difference in
principle. Further the legal position is no different even where the matter is
governed by statutory rules, is evident from the decisions in Hind Stone
(supra) and Howrah Municipal Corporation (supra).
15.
Having regard to the fact that the State has exclusive privilege
of manufacture and sale of liquor, and no citizen has a fundamental right to
carry on trade or business in liquor, the applicant did not have a vested right
to get a licence. Where there is no vested right, the application for licence
requires verification, inspection and processing. In such circumstances it has
to be held that the consideration of application of FL-3 licence should be only
with reference to the rules/law prevailing or in force on the date of
consideration of the application by the excise authorities, with reference to
the law and not as on the date of application. Consequently the direction by
the 16 High Court that the application for licence should be considered with
reference to the Rules as they existed on the date of application cannot be
sustained.
Re:
Question (ii)
16.
The applicants for licence submitted that Rule 13(3) contemplates
FL-3 licences being granted on fulfillment of the conditions stipulated
therein; and the newly added proviso, by barring grant of new licence had the
effect of nullifying the main provision itself. It was contended that the
proviso to Rule 13(3) added by way of amendment on 20.2.2002 was null and void
as it went beyond the main provision in Rule 13(3) and nullified the main
provision contained in Rule 13(3).
17.
Rule 13(3) provides for grant of licences to sell foreign liquor
in Hotels (Restaurants). It contemplates the Excise Commissioner issuing
licences under the orders of the State Government in the interest of promotion
of tourism in the State, to hotels and restaurants conforming to standards
specified therein. It also provides for the renewal of such licences. The
substitution of the last proviso to Rule 13(3) by the notification dated
20.2.2002 provided that no new licences under the said Rule shall be 17 issued.
The proviso does not nullify the licences already granted. Nor does it
interfere with renewal of the existing licences. It only prohibits grant of
further licences. The issue of such licences was to promote tourism in the
State.
The promotion
of tourism should be balanced with the general public interest. If on account
of the fact that sufficient licences had already been granted or in public
interest, the State takes a policy decision not to grant further licences, it
cannot be said to defeat the Rules. It merely gives effect to the policy of the
State not to grant fresh licences until further orders. This is evident from
the explanatory note to the amendment dated 20.2.2002. The introduction of the
proviso enabled the State to assess the situation and reframe the excise
policy. It was submitted on behalf of the State Government that Rule 13(3) was
again amended with effect from 1.4.2002 to implement a new policy. By the said
amendment, the minimum eligibility for licence was increased from Two-star
categorization to Three-Star categorization and the ban on issue of fresh
licences was removed by deleting the proviso which was inserted by the
amendment dated 20.2.2002. It was contended that the amendments merely
implemented the policies of the government from time to time. There is
considerable force in the contention of the State. If the State on a 18
periodical re-assessment of policy changed the policy, it may amend the Rules
by adding, modifying or omitting any rule, to give effect to the policy. If the
policy is not open to challenge, the amendments to implement the policy are
also not open to challenge. When the amendment was made on 20.2.2002, the
object of the newly added proviso was to stop the grant of fresh licences until
a policy was finalized. A proviso may either qualify or except certain
provisions from the main provision; or it can change the very concept of the
intendment of the main provision by incorporating certain mandatory conditions
to be fulfilled;
or it can
temporarily suspend the operation of the main provision. Ultimately the proviso
has to be construed upon its terms. Merely because it suspends or stops further
operation of the main provision, the proviso does not become invalid. The
challenge to the validity of the proviso is therefore rejected.
18.
In view of the above, the appeals filed by the State are allowed
in part and the appeals filed by the applicants for licences are dismissed,
subject to the following clarifications:
(i) If
any licences have been granted or regularized in the case of any of the
applicants during the 19 pendency of this litigation, on the basis of any
further amendments to the Rules, the same will not be affected by this
decision;
(ii) If
any licence has been granted in pursuance of any interim order, the licence
shall continue till the expiry of the current excise year for which the licence
has been granted.
(iii)
This decision will not come in the way of any fresh application being made in
accordance with law or consideration thereof by the State Government.
______________________J. (R. V. RAVEENDRAN)
_____________________J. (SURINDER SINGH NIJJAR)
New Delhi;
January 13, 2010.
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