# 3 S.C.R. 1054 STATE OF KERALA & ORS v. B. SURENDRA DAS ETC

- **Citation:** [2014] 3 S.C.R. 1054
- **Court:** Supreme Court of India
- **Decided:** 2014-03-05
- **Case number:** Civil Appeal Nos. 3196-98 of 2014
- **Bench:** H.L. Gokhale, J. Chelameswar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/3-s-c-r-1054-state-of-kerala-ors-v-b-surendra-das-etc-29868
- **Pages:** 43

## Headnote

ABKARI POLICY: Kera/a Abkari Policy - Object of - Held:
Is to curb the rampant alcoholism in the State of Kera/a, which
C claims to have the highest consumption of alcohol as against
the other states in India, and whereby the younger generation
is getting addicted - The objective is in pursuance of Article
47 of the Constitution which declares it to be a Directive Policy
for the State to endeavour to bring about prohibition of
D consumption of intoxicating drinks - Constitution of India,
1950 - Article 47 - Liquor.
CONSTITUTION OF /NOIA, 1950 - Article 47 - Liquor -
Right to trade - Held: There is no fundamental right to trade
E . in liquor - At the same time where such a trade is permitted,
there cannot be any room for discrimination.
KERALA ABKARI ACT:
r.13 - Kera/a Abkari Policy 2011-12 -Amendment to s.13
F omitting words 'three star' from r. 13(3) - Constitutionality of -
Held: In the case of B. Six Holiday Resorts, the deletion of
two star hotels from the eligibility of FL-3 licences was upheld
by Supreme Court - It was held therein that promotion of
tourism should be balanced with general public interest and
G that if policy is not open to challenge the amendment of the
rules to effect the policy can also not be challenged - Deletion
of three star hotels falls in the same genre as the deletion of
two star hotels, which was done earlier - This being the
position, the State cannot be faulted for deletion of three star
H
1054
STATE OF KERALA & ORS. v. B. SUREN ORA DAS 1055
ETC.
hotels after a periodical revision of the policy.
A
r.13 - Kera/a Abkari Policy 20'11-12 -Amendment to r.13
introducing distance rule - Constitutionality of - Held: The
consequences of the amendment would be that four star and
five star hotels would not be permitted to have FL-3 licences
8
only on the ground that they are within the prohibited distance
from such hotels which have poor hygiene standards, and
which are not following norms laid down by the State
Government - As per the report of the GAG, there was
violation of licence conditions by the Bar Hotels - The Excise
C
Commissioner also sent a letter to the Government
· highlighting poor standards maintained by the 418
unclassified bars and requesting not to grant fresh FL3
licenses as during the last one year several people had died
due to excessive drinking in the unclassified hotels - Even
then seven more FL3 licenses were issued - Moreover in the
D
Abkari Policy for 2010-11, the Government declared that the
FL3 licensees not having the requisite star qualification and
,,-.;ho were functional during 2009-10 should be regularized -
Government having not taken a firm stand to ensure that only
hotels of a minimum standard are issued FL3 licenses has
E
seriously compromised public safety - This is counterproductive to the objective of r. 13(3), which is to promote
tourism, as well as to the State's avowed policy of improving
the health and nutrition standards of its citizens - In the
circumstances, although there is no dispute regarding the
F
power of the State Government to bring about the necessary
reform, by modifying the rules, it has got to be justified on the
touchstone of the correlation between the provision and the
objective to be achieved - If that correlation is not established,
surely the rule will suffer from the vice of arbitrariness, and G
therefore will be hit by Article 14 - The State Government has
appointed a one-man commission for reviewing the Abkari
Policy, by issuing a necessary notification - The commission
would take into consideration the hard realities which are
reflected in the report of the CAG and make necessary
H
1056
SUPREME COURT REPORTS
[2014] 3 S.C.R.
A recommendations - In these circumstances, distance rule by
way of addition of Rule (3E) in Rule 13(3) is held to be bad
in law - The state government will not proceed to deny FL3
licenses to hotels with a classification of four star and above
by resorting to their deletion under r. 13(3) until the report of
B t

## Text

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A
B
(2014] 3 S.C.R. 1054
STATE OF KERALA & ORS.
v.
B. SURENDRA DAS ETC.
(Civil Appeal Nos. 3196-98 of 2014)
MARCH 5, 2014
[H.L. GOKHALE AND J. CHELAMESWAR, JJ.]
ABKARI POLICY: Kera/a Abkari Policy - Object of - Held:
Is to curb the rampant alcoholism in the State of Kera/a, which
C claims to have the highest consumption of alcohol as against
the other states in India, and whereby the younger generation
is getting addicted - The objective is in pursuance of Article
47 of the Constitution which declares it to be a Directive Policy
for the State to endeavour to bring about prohibition of
D consumption of intoxicating drinks - Constitution of India,
1950 - Article 47 - Liquor.
CONSTITUTION OF /NOIA, 1950 - Article 47 - Liquor -
Right to trade - Held: There is no fundamental right to trade
E . in liquor - At the same time where such a trade is permitted,
there cannot be any room for discrimination.
KERALA ABKARI ACT:
r.13 - Kera/a Abkari Policy 2011-12 -Amendment to s.13
F omitting words 'three star' from r. 13(3) - Constitutionality of -
Held: In the case of B. Six Holiday Resorts, the deletion of
two star hotels from the eligibility of FL-3 licences was upheld
by Supreme Court - It was held therein that promotion of
tourism should be balanced with general public interest and
G that if policy is not open to challenge the amendment of the
rules to effect the policy can also not be challenged - Deletion
of three star hotels falls in the same genre as the deletion of
two star hotels, which was done earlier - This being the
position, the State cannot be faulted for deletion of three star
H
1054
STATE OF KERALA & ORS. v. B. SUREN ORA DAS 1055
ETC.
hotels after a periodical revision of the policy.
A
r.13 - Kera/a Abkari Policy 20'11-12 -Amendment to r.13
introducing distance rule - Constitutionality of - Held: The
consequences of the amendment would be that four star and
five star hotels would not be permitted to have FL-3 licences
8
only on the ground that they are within the prohibited distance
from such hotels which have poor hygiene standards, and
which are not following norms laid down by the State
Government - As per the report of the GAG, there was
violation of licence conditions by the Bar Hotels - The Excise
C
Commissioner also sent a letter to the Government
· highlighting poor standards maintained by the 418
unclassified bars and requesting not to grant fresh FL3
licenses as during the last one year several people had died
due to excessive drinking in the unclassified hotels - Even
then seven more FL3 licenses were issued - Moreover in the
D
Abkari Policy for 2010-11, the Government declared that the
FL3 licensees not having the requisite star qualification and
,,-.;ho were functional during 2009-10 should be regularized -
Government having not taken a firm stand to ensure that only
hotels of a minimum standard are issued FL3 licenses has
E
seriously compromised public safety - This is counterproductive to the objective of r. 13(3), which is to promote
tourism, as well as to the State's avowed policy of improving
the health and nutrition standards of its citizens - In the
circumstances, although there is no dispute regarding the
F
power of the State Government to bring about the necessary
reform, by modifying the rules, it has got to be justified on the
touchstone of the correlation between the provision and the
objective to be achieved - If that correlation is not established,
surely the rule will suffer from the vice of arbitrariness, and G
therefore will be hit by Article 14 - The State Government has
appointed a one-man commission for reviewing the Abkari
Policy, by issuing a necessary notification - The commission
would take into consideration the hard realities which are
reflected in the report of the CAG and make necessary
H
1056
SUPREME COURT REPORTS
[2014] 3 S.C.R.
A recommendations - In these circumstances, distance rule by
way of addition of Rule (3E) in Rule 13(3) is held to be bad
in law - The state government will not proceed to deny FL3
licenses to hotels with a classification of four star and above
by resorting to their deletion under r. 13(3) until the report of
B the one-man commission is received, and until it takes action
against the non-standard restaurants which have been
permitted under the sixth and seventh proviso of r. 13(3).
Classification and reclassification of hotels - Bar licence
- Held: The two star and three star hotels stand on a different
C footing as against the hotels with four star and higher
classification under the tourism policy of the Government of
India - The Ministry of Tourism of the Government of India
has issued the amended guidelines for classification/reclassification of hotels on 28. 6. 2012 - The classification of the
D hotels into star categories and heritage categories is done
thereunder, and it is a voluntary scheme - If a local law
prohibits the issuance of a bar licence to four star, five star,
five star deluxe, heritage classic and heritage grand
categories, which is otherwise necessary, such local law will
E prevail - In any case three star hotels will have to be placed
in a different category as against the hotels with four star and
higher classification, since it is not necessary for three star
hotels to have an FL3 licence.
F
Pursuant to the State's Abkari Policy framed in 201112, two amendments were introduced by the State of
Kerala in Rule 13 of the Kerala Abkari Act. Firstly, the
words 'three star' were omitted from Rule 13(3).
Consequently, after this amendment of the rule which
G came into force immediately, three star hotels not already
having a licence, were held not eligible to get a bar
licence for retail sale of liquor in the hotels. Thus, no new
hotels having the three star classification were entitled to
the licence known as FL-3 licence for selling the IMFL.
The hotels having the two star or lesser classification
H
I
. '
STATE OF KERALA & ORS. v. B. SUREN ORA DAS 1057
ETC.
were already ineligible to get this licence by virtue of the
A
pre-existing proviso to Rule 13(3), introduced by
notification dated 20.12.2002. Secondly, Rule (3E) was
added in Rule 13 w.e.f. 27.3.2012 introducing distance rule
whereby no new bar hotels of any classification were
permitted to be opened (a) if they were situated within a
B
distance of 3 kms. from existing bar hotels in a panchayat
area, and (b) within a distance of 1 km. from existing bar
hotels in a municipal area. Writ petitions were filed
challenging these. amendments. A single judge of High
Court dismissed the writ petition. The Division Bench of c
the High Court allowed the appeals and struck down the
two amendments as unconstitutional. The instant
appeals were filed challenging the order of the High
Court.
Partly allowing the appeals, the Court
HELD: 1. The avowed object of this Abkari Policy is
to curb the rampant alcoholism in the State of Kerala,
which claims to have the highest consumption of alcohol
D
as against the other states in India, and whereby the
E
younger generation is getting addicted. Thus, the
objective is in pursuance of Article 47 of the Constitution
of India which declares it to be a Directive Policy for the
State to endeavour to bring about prohibition of
consumption of intoxicating drinks. [para 4] [1066-B-C]
F
2. Abkari Policy of the Government of Kerala for the
year 2011-2012:-
The Government of Kerala announced the Abkari
Policy on 17.8.2011 wherein serious concern was shown
G
regarding the rising trend of alcoholism and the
consequential social issues arising in the Kerala society
and government clarification that it did not wish to view
the liquor business as a source of revenue. [Para 5, 6 and
7] [1067-B, C, D-F]
H
1058
SUPREME COURT REPORTS
(2014] 3 S.C.R.
A
3. There cannot be any dispute on the proposition
that, there is no fundamental right to trade in liquor. At
the same time the dicta of the Supreme Court in Khoday
Distilleries cannot be ignored that where such a trade is
permitted, there can not be any room for discrimination.
B [para 32] [1088-A-B]
Khoday Distilleries Ltd. & Ors. v. State of Karnataka 1995
(1) SCC 574 1994 (4) Suppl. SCR 477 ; State of Kera/a v.
B. Six Holiday Resorts Private Ltd. 1010 (5) SCC 186: 2010
C (3) SCR 1 - relied on.
4. There are two amendments which are under
challenge. As far as the deletion of three star hotels is
concerned, in the case of B. Six Holiday Resorts wherein,
the previous deletion of two star hotels from the eligibility
D of FL-3 licences was upheld by this Court. It was held
that promotion of tourism should be balanced with
general public interest. Paragraph 31 permitted a
periodical reassessment of policy, and held that if policy
is not open to challenge the amendment of the rules to
E effect the policy can also not be challenged This being
the position the grievances made by the hoteliers with
respect to the deletion of three star hotels, and to insist
on a bar licence, cannot be sustained, on this ground.
Deletion of three star hotels falls in the same genre as the
F deletion of two star hotels, which was done earlier. This
Court has upheld the deletion of two star hotels in the
said judgment. This being the position the state can not
be faulted for deletion of three star hotels after a
periodical revision of the policy. [para 33] [1088-B-G]
G
5. The two star and three star hotels stand on a
different footing as against the hotels with four star and
higher classification under the tourism policy of the
Government of India. The Ministry of Tourism (H&R
Division) of the Government of India has issued the
H amended guidelines for classification/re-classification of
STATE OF KERALA & ORS. v. B. SURENDRA DAS 1059
ETC.
hotels on 28.6.2012. The classification of the hotels into
A
star categories and heritage categories is done
thereunder, and it is a voluntary scheme. Annexure-2
contains the provisions concerning classification/reclassification of operational hotels. This being the
position, it is not necessary for a three star hotel to have
B
a bar licence. In fact para 8(f) also states that if a local law
prohibits the issuance of a bar licence to four star, five
star, five star deluxe, heritage classic and heritage grand
categories, which is otherwise necessary, such local law
will prevail. In any case three star hotels will have to be c
placed in a different category as against the hotels· with
four star and higher classification, since it is not
necessary for three star hotels to have an FL3 licence.
[Para 34] [1088-G-H; 1089-A-B, D-E]
6. The position with respect to the distance rule
D
introduced in 2012 is, however, different. As far as the
amendment brought in 2012 introducing the distance rule
is concerned, the hard realities cannot be ignored which
were recorded in the report of the Comptroller and
Auditor General who is a constitutional functionary, and
E
who has made the report on receiving the necessary
information from the State Government. Para 5.3.1.1 of the
report spoke for itself and read that the field officers of
the Department had reported violation of licence
conditions like unhygienic conditions, lack of facilities,
F
non adherence of the time schedule, selling on dry days,
opening more than one counter, etc. in these bar hotels.
However, no action was taken by the Department on
these reports. The Excise Commissioner sent a letter
(January 2011) to the Government highlighting the poor G
standards maintained by the 418 unclassified bars and
requested not to grant fresh FL3 licenses for areas other
than tourism notified areas. In the letter the Excise
Commissioner, inter alia, stated that the restaurant
segment of the unclassified hotels were functioning for
H
1060
SUPREME COURT REPORTS
[2014] 3 S.C.R.
A name sake only and during the last one year seven
people had died due to excessive drinking in the
unclassified hotels. He also pointed out that he had
personally seen that almost all the customers went there
to drink liquor and not for taking food. Even though the
s Excise Commissioner had requested not to issue fresh
FL3 licenses, seven more FL3 licenses were issued
between 12 January and 31 March 2011. Moreover in the
Abkari Policy for 2010-11, the Government declared that
the FL3 licensees not having the requisite star
c qualification and who were functional during 2009-10
should be regularised. Thus, the Government has made
it a regular feature to regularise ineligible licensees. The
Government has not taken a firm stand to ensure that
only hotels of a minimum standard are issued FL3
0 licenses. Further, the Government has seriously
compromised public safety by (a) regularising 418
unclassified bars, though they were not able to attain the
minimum standards despite repeated extension of time
and (b) by turning a blind eye towards the various
complaints against these unclassified bars. On this being
E pointed out in audit the Department stated (June 2011)
that the Government is the competent authority to issue
orders allowing relaxation, if any, for the functioning of
FL3 licensees/bar hotels. [para 35] [1089-F-G; 1091-C-H;
1092-A-C]
F
7. The consequences of the amendment of 2012 will
be that four star and five star hotels would not be
permitted to have FL-3 licences only on the ground that
they are within the prohibited distance from such hotels
G which have poor hygiene standards, and which are not
following norms laid down by the State Government. The
FL3 licences are issued on an annual basis, and it is quite
within the powers of the Government not to renew these
licenses if such serious violations are reported. But the
H Government appears to be slow in taking any such
STATE OF KERALA & ORS. v. B. SUREN ORA DAS 1061
ETC.
action. It will surely be counter--productive to the
A
objective of Rule 13 (3), which is to promote tourism, as
well as to the State's avowed policy of improving the
health and nutrition standards of its citizens. The
criticism of the respondents, particularly of the hotels
which have been permitted under the 6th and 7th proviso
B
to Rule 13(3), is therefore quite justified. In the
circumstances, although there is no dispute regarding the
power of the State Government to bring about the
necessary reform, by modifying the rules, it has got to be
justified on the touchstone of the correlation between the c
provision and the objective to be achieved. If that
correlation is not established, surely the rule will suffer
from the vice of arbitrariness, and therefore will be hit by
Article 14. The State Government has introduced
awareness programmes in this behalf and, it ought to 0
continue with that. It should also take steps to see to it
that hotels with poor hygiene standards are not allowed
to function. The State Government has appointed a oneman commission for reviewing the Abkari Policy, by
issuing a necessary notification on 23.1.2013. It is hoped
that the commission will take into consideration the hard
realities which are reflected in the report of the CAG and
make necessary recommendations. As far as this Court
is concerned, the validity of the amendment of 2012, in
the present circumstances cannot be upheld. [paras 36,
37] [1092-D-H; 1092-A-C]
8. If the Government is really serious about reducing
the consumption of liquor, it should also take steps to
reduce its own shops and depots and in any case should
E
F
not open new ones. In view of the very high consumption
G
of liquor, which the State Government intends to reduce,
the Government should consider not issuing further FL1 licences. If it is not possible for the Government to
reduce the existing FL-1 shops, with respect to which it
enjoys a monopoly, it is of no use for it to direct the
H
1062
SUPREME COURT REPORTS
[2014] 3 S.C.R.
A private sector alone to function in a particular manner.
The Government must as well behave in conformity with
the mandate of Article 47. There is one more development
in this matter. In as much as this court had not granted
any stay of the impugned judgment and order of the High
B Court, an order was passed by this Court on 19/9/2012
that the applications of the claimants for the licenses be
considered in eight weeks. Since no decision was
forthcoming, some of the respondents filed Contempt
Petitions. A notice was issued on the Contempt Petition
c filed by respondent. A reply was filed on behalf of the
appellants on 25.01.2013 that they had considered the
applications, some of them were rejected, and in the rest
further information was sought. These steps were
initiated within the time stipulated by this court, and due
0 to the large number of applications, the decision was
taking its own time. On 8.02.2013, this court directed that
the Contempt Petitions be heard alongwith the special
leave petitions. Since the Civil appeals arising out of
these SLPs are being disposed of with this order, no
E separate orders are required on the contempt petitions.
The appellants will have to act now in terms of the order
being passed herein. [paras 39, 40] (1094-G-H; 1095-A-E]
F
P.N. Kausal and Ors. vs. Union of India & Ors. 1978 (3)
sec 558 - relied on.
Kuldip Singh vs. Government of NCT of Delhi 2006 (5)
SCC 702:2006 (3) Suppl. SCR 335; Khandige Sham Bhat
and Ors. vs. The Agricultural Income Tax Officer AIR 1963
SC 591: 1963 SCR 809; State of Kerala Vs. Maharashtra
Distilleries Ltd & Ors. 2005 (11) SCC 1: 2005 (1) Suppl. SCR
G 91; Javed and Ors. vs. State of Haryana 2003 (8) SCC 369:
2003 (1) Suppl. SCR 947; Balco Employees Union vs. Union
of India 2002 (2) SCC 333: 2001 (5) Suppl. SCR 511 ; State
of Andhra Pradesh and Ors. vs. Mc Dowell and Co. 1996 (3)
SCC 709: 1996 (3) SCR 721 ; Mis Ugar Sugar Works Ltd.
H vs. Delhi Administration & Ors. 2001 (3) SCC 635: 2001 (2)
STATE OF KERALA & ORS. v. 8. SURENDRA DAS 1063
ETC.
SCR 630; State of M.P. vs. Nandlal Jaiswal & Ors. 1986 (4)
A
SCC 566: 1987 (1) SCR 1 ; State of Jammu and Kashmir
vs. Triloki Nath Khosa & Ors. 1974 (1) SCC 19: 1974 (1) SCR
771 ; Rashbihari Panda vs. State of Orissa 1969 (1) SCC
414: 1969 (3) SCR 374 ; State of Maharashtra vs. Indian
Hotels and Restaurant Assn. 2013 (8) SCC 519: 2013 (7)
B
SCR 654; Reliance Energy Limited vs. Maharashtra State
Road Development Corporation 2007 (8) SCC 1: 2007 (9)
SCR 853 • referred to.
9. The judgment rendered by the Division Bench is
set-aside to the extent it interferes with the amendment
C
brought in the year 2011. The deletion of three star hotels
from the category of hotels eligible for FL3 licenses under
Rule 13(3) is held valid.As far as the amendment brought
in 2012 introducing the distance rule by way of addition
of Rule (3E) in Rule 13(3) is concerned, the same is held
D
to be bad in law. The judgment of the High Court is
confirmed to that extent. The state government will not
proceed to deny FL3 licenses to hotels with a
classification of four star and above by resorting to their
deletion under Rule 13 (3) until the report of the one-man
E
commission is received, and until it takes action against
the non-standard restaurants which have been permitted
under the sixth and seventh proviso of Rule 13(3). [para
41] [1095-F-H; 1096-A-B]
Case Law Reference:
1994 (4) Suppl. SCR 477
relied on
Para 10
2006 (3) Suppl. SCR 335
relied on
Para 17
2010 (3) SCR 1
relied on
Para 18
1963 SCR 809
Referred to
Para 19
2005 (1) Suppl. SCR 91
Referred to
Para 20
2003 (1) Suppl. SCR 94·7
Referred to
Para 21
F
G
H
1064
SUPREME COURT REPORTS
(2014) 3 S.C.R.
A
2001 (5) Suppl. SCR 511
Referred to
Para 21
1996 (3) SCR 721
Referred to
Para 22
2001 (2) SCR 630
Referred to
Para 23
B
1987 (1) SCR 1
Referred to
Para 26
1974 (1) SCR 771
Referred to
Para 27
1969 (3) SCR 374
Referred to
Para 28
2013 (7) SCR 654
Referred to
Para 29
c
2007 (9) SCR 853
Referred to
Para 29
1978 (3) sec 558
Relied on
Para 30
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.
D 3196-98 of 2014.
E
F
From the Judgment and Order dated 27.07.2012 of the
High Court of Kerala at Ernakulam in W.A. Nos. 470, 670 and
745 of 2012.
WITH
Civil Appeal Nos. 3199-3218, 3219, 3220, 3221, 3222, 3223,
3224, 3225, 3226 and 3227 of 2014, Contempt Petition (C)
Nos. 449 and 450 of 2012, 20, 18 and 19 of 2013, 431, 432444 of 2012 and 5 of 2013.
V. Giri, Mukul Rohatgi, Chander Uday Singh, Krishnan
Venugopal, Mohammed Sadique, Abhilash M.R., Krishna
Pradip, Ramesh Babu M.R., Aditya Soni, G. Prakash, Himinder
Lal, D.K. Devesh, S.K. Roshan, Prasenjit Pritam, Amarjit Singh
Bedi, Radha Shyam Jena, K.B. Pradeep, Sanand
G Ramakrishnan, Rajeev Mishra, Sumita Hazarika, AS. Tuisem
Shimray, Romy Chacko, Varun Mudgal, M.C. Ashri, Sudhi
Vasudevan, V.K. Sidharthan, Roy Abraham, Reena Roy,
Seema Jain, Harish Beeran, Amer Mushtaq, Deepak Prakash, /
Biju P. Raman, Vivek Kumar Verma, Haritha V.A. (for Usha
1
H Nandini V.), Joe Joseph Kochikunni, M.P. Vinod, Dileep ft>illai,
STATE OF KERALA & ORS. v. B. SURENDRA DAS 1065
ETC.
Ajay K. Jain, Neelam Saini, James P. Thomas, Rohit Kumar
A
Singh, Sajith P.Warrier, P.O. Baby John, Venkita Subramoniam
T.R., Rahat Bansal, P. Sreekumar, Alex Joseph, Shiv Sagar
Tiwari, Bobby Augustine, Rajesh Tiwari for the Appearing
Parties.
The Judgment of the Court was delivered by
H.L. GOKHALE J. 1. Leave granted.
B
2. This group of Civil Appeals raises the questions with
respect to the legality and validity of two amendments c
introduced by the first appellant-State of Kerala, in pursuance
of its Abkari Policy framed in 2011-2012, in the Foreign Liquor
Rules framed under the Kerala Abkari Act, since those
amendments have been struck down as unconstitutional by the
impugned judgment and order rendered by the High Court of D
Kera la.
3. Rule 13 of the Foreign Liquor Rules governs the grant
of licences for the sale of the Indian Manufactured Foreign
Liquor ('IMFL' for short). The two amendments which are
disputed are as follows:-
E
(i) Firstly, the words 'three star' were omitted from Rule
13(3) of these rules by Government of Kerala by issuing
notification dated 9.12.2011. Consequently, after this
amendment of the rule which has come into force immediately,
F
three star hotels not already having a licence, will not be eligible
to get a bar licence for retail sale of liquor in the hotels. Thus,
no new hotels having the three star classification will be issued
the licence known as FL-3 licence for selling the IMFL. The
hotels having the two star or lesser classification are already
G
ineligible to get this licence by virtue of the pre-existing proviso
to Rule 13(3), introduced by notification dated 20.12.2002.
(ii) Secondly, Rule (3E) has been added in this Rule 13
w.e.f. 27.3.2012 by issuing a notification of even date, whereby
H
1066
SUPREME COURT REPORTS
[2014] 3 S.C.R.
A no new bar hotels of any classification will be permitted to be
opened (a) if they are situated within a distance of 3 kms. from
existing bar hotels in a panchayat area, and (b) within a
distance of 1 km. from existing bar hotels in a municipal area.
B
4. The avowed object of this Abkari Policy is to curb the
rampant alcoholism in the State of Kerala, which claims to have
the highest consumption of alcohol as against the other states
in India, and whereby the younger generation is getting
addicted. Thus, the objective is in pursuance of Article 47 of
the Constitution of India which declares it to be a Directive
C Policy for the State to endeavour to bring about proh:!:>ition of
consumption of intoxicating drinks. These two amendments
were challenged by the respondents in the Kerela High Court
on the touchstone of Article 14 of the Constitution of India, as
being arbitrary, discriminatory, irrational, excessive, and even
D malafide. It is contended by them that the amendments will not
succeed in achieving the objectives for which they have been
introduced. On the contrary, the two amendments will affect the
other objective of the policy of the State of Kerala viz. to
encourage and increase tourism in the State.
E
5. The respondent No.1, B. Surendra Das, was one such
person who filed a Writ Petition, bearing Writ Petition (C)
No.5650/2012, to challenge the denial of the FL-3 licence to
his three star hotel on the basis of the first amendment effected
F by notification dated 9.12.2011. The writ petition was
dismissed by a Single Judge by his judgment and order dated
7.3.2012. Being aggrieved by the said judgment and order, he
preferred Writ Appeal No.470/2012. Some other persons
whose writ petitions were rejected, filed similar Writ Appeals.
G The distance rule introduced with the addition of Rule (3E) in
Rule 13 w.e.f. 27.3.2012 was also challenged by some other
persons by filing Writ Petitions directly to the Division Bench.
All these Writ Appeals and Writ Petitions were allowed by a
Division Bench of the High Court by its common judgment and
order dated 27. 7.2012, which struck down the two amendments
H
STATE OF KERALA & ORS. v. B. SURENDRA DAS 1067
ETC. [H.L. GOKHALE, J.]
as unconstitutional. Being aggrieved by the said judgment and
A
order, these appeals have been filed by the appellant-State of
Kerala and its concerned officers of the Excise Department.
Abkari Policy of the Government of Kerala for the year
2011-2012:-
6. Before we deal with the impugned judgment and the
amendments, we must first refer to the Abkari Policy of the
Government of Kerala which led to the two disputed
amendments to Rule 13. The Government of Kerala announced
B
the Abkari Policy on 17.8.2011. In the second sub-para of the
C
very first paragraph of this policy, the Government noted as
follows:-
"This Government views with serious concern the rising
trend of alcoholism and the consequential social issues
D
arising in the Kera/a society. Strong feelings against this
have been emanating from the civil society. Fully
realising, Government intends to formulate a stringent
Abkari Policy. "
7. The notable features of this policy were as follows:-
E
"a,
The Government noted the rising trend of
alcoholism in the state and its consequences.
b.
Clarified that it did not wish to view the liquor
F
business as a source of revenue.
c.
Noted that as a prelude to forming its Abkari
Policy, detailed discussions were held with
stakeholders, such as trade-unions in the Toddy/
IMFL sector, bar-owners, distilleries and brewers,
G
anti-liquor organizations, NGOslindividuals
running de-addiction centers, religious heads. Etc.
d.
For IMFL the following yard-sticks wereimposed
H
A
B
c
D
E
1068
SUPREME COURT REPORTS
[2014] 3 S.C.R.
(i) A condition insisting on a distance of 3 km and
1 km fromexisting bar hotels in panchayats and
municipalities respectively.
(ii) From 1.4.2012 bar licences would begranted
only to hotels having four-star and above
classification.
(iii) From the 2013-2014 financial year onwards
Bar- licences would be granted only to five star
hotels etc.
e.
Further, impositions were as follows:
(i) The age limit for buying and selling alcohol was
increased.
(ii) The maximum limit of alcohol possession was
reduced.
(iii) The working hours of bars were altered and
restricted to 8 am to 11 pm in panchayats and 9
am to 12 pm in corporation areas."
The relevant Foreign Liquor Rule 13(3):-
8. As a consequence of this policy the two amendments
were brought in, firstly the denial of fresh licences to three star
F hotels by the amending notification dated 9.12.2011, and
secondly the distance rule by the notification dated 27.3.2012.
Relevant portion of Rule 13(3) reads as follows:-
G
"13. Licences for possession, use or sale:- Licences for
the possession and sale of foreign liquor or for
possession or use of foreign liquor shall be of the
following descriptions and in the forms appended hereto.
xxx
xxx
xxx
H
(3) Foreign Liquor 3 Hotels (Restaurant) Licence:-
STATE OF KERALA & ORS. v. B. SURENDRA DAS 1069
ETC. [H.L. GOKHALE, J.]
Licence in this form may be issued by the Excise
A
Commissioner under orders of Government, in the
interest of promotion of tourism in the State, to hotels
which have obtained (three star)1, four star, five star, five
star deluxe, heritage, heritage grand or heritage classic
classification from Ministry of Tourism, Government of B
India, where the privilege of sale of foreign liquor in such
hotels have been purchased on payment of an annual
rental of Rs. 22,00,000 (Rupees twenty two lakhs only).
But no such licence shall be issued to hotels which are
located within 200 (two· hundred) metres from an c
educational institution, temple, church, mosque or burial
ground. Hotels other than those in the private sector
having four star, five star, five star deluxe classification
will be exempted from the distance restrictions in the
interest of promotion of tourism in the State. In the case
0
of hotels in the private sector of the above categories and
hotels having heritage, heritage grand and heritage
classic classification issued by the Ministry of Tourism,
. Government of India, no such licence shall be issued if
located within 50 (fifty) metres from any educational
E
institution, temple, church, mosque, burial ground or
scheduled caste/scheduled tribe colony. The applicant
shall produce from the Abkari Workers Welfare Fund
Inspector a certificate to the effect that he has remitted
before the date of application for the licence/renewal of
licence, the arrears of contributions, if any, payable upto
F
the 31st of December of the preceding year.
The existing licencees who do not maintain two star
standards will be allowed time upto 31st March, 2007 to
upgrade their standards to two star. Their licence will be
G
renewed till that date. Failure to upgrade the standard of
those hotels would lead to cancellation of licence and
forfeiture of rental paid by them. Licencees shall have no
claim for compensation. The applicant shall produce
from the Abkari Worker's Welfare Fund Inspector a
H
B
c
D
E
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SUPREME COURT REPORTS
[2014] 3 S.C.R.
certificate to the effect that he has remitted before the date
of application for the licence/renewal of licence, the
arrears of contribution, if any, payable upto 31st day of
December preceding year.
The question whether a hotel or restaurant confirms
to the standard of two star hotel shall be determined in
accordance with the specific issues for classification of
star hotels issued by the Department of Tourism and in
case of doubt or dispute, the decision of the Excise
Commission shall be final.
The cost of liquor shall be billed along with the cost
of meals. The cost of liquor shall be shown separately in
the bill and the duplicate copies thereof shall be retained
for inspection by the Officers of the Excise Commission.
xxx
xxx
xxx
Provided also that such bar licences, having dispute on
distance rules and shifting outside Municipal Corporation
area, including those of Approved Restaurants, existing
as on 1st April, 2004 shall be regularized.
(Fourth Proviso)
xxx
xxx
xxx
F
Provided further that all existing licences not having the
above classification and are functional as on 31st March,
2007 shall be regularized.
(Sixth Proviso)
G
Provided also that all FL-3 licences not having the
requisite star classification and are functional during
2009-2010 shall be regularized.
(Seventh Proviso)
H
STATE OF KERALA & ORS. v. B. SURENDRA DAS 1071
ETC. [H.L. GOKHALE, J.)
xxx
xxx
xxx
(38) No liquor shall be sold under FL-3 licences for
removal outside the hotel to anyone including the
residents of the hotel:
A
Provided that the liquor may be sold and served to the
B
residents of the hotel in the rooms where they reside or
in the restaurant where they partake food, if such hotels
have restaurants exclusively for the use of families and
others where no liquor shall be served:
Provided further that the holder of an FL-3 licence may
serve liquor along with meals by the side of swimming
pools and in the lawns and roof gardens of the hotel if
c
he obtains a special permit for the purpose from the
Commissioner of Excise, on payment of additional D
annual rental of {Rs. 50, OOO(Rupees Fifty Thousand
only)].
Provided also that for serving liquor at restaurants to
persons other than residents, the licencee shall pay an
additional annual fee of [Rs. 25,000 (Rupees Twenty Five E
Thousand)].
xxx
xxx
xxx
(3E) 2 Notwithstanding anything contained in these rules,
F
no new FL-3 licence shall be granted to hotels which are
located within a radius of three kilometers in Grama
Panchayat and one kilometer in Municipal Corporation/
City Corporation, from another hotel having an FL-3
licence granted under this rule].
G
1. Deleted by impugned Amendment of 2011.
2. Introduced by impugned Amendment of 2012."
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[2014] 3 S.C.R..
A Judgment of the Single Judge:-
9. The learned single Judge who heard the matter
concerning the denial of licences to new three star hotels held
that there was no vested right to get a licence, leave aside any
B Fundamental Right. It was held that there was no element of
discrimination, nor that of legitimate expectation. He also held
that the unamended rule cannot be applied once the amendment
comes into force, and therefore rejected the petition.
c
Judgment of the Division Bench:-
10. The Division Bench, on the other hand, noted in
paragraph 5 of its judgment the submission of the respondents
that although there was no Fundamental Right to carry on
business in liquor, as held in Khoday Distilleries Ltd. & Ors. vs.
D State of Karnataka reported in 1995 (1) SCC 574, once the
State permits such a trade, it has to make rules and permit the
business without any arbitrariness or discrimination, and in
conformity with Article 14 of the Constitution of India. It also
noted the submissions of the respondents that they have made
E huge investments, and many of them had earned the
classification of heritage hotels from the Ministry of Tourism,
Government of Kerala. They also challenged the 4th, and
particularly 6th and 7th proviso of this rule. The 6th proviso
regularized the licences as functioning on 31.3.2007. The 7th
proviso regularized those licences functioning during 2009F 2010. It was submitted that if such hotels, although not
conforming to the statutory requirements, were to be tolerated,
how can the distance rule be applied to deny licences to hotels
having three star, four star or higher classification, which meet
the prescribed criteria, by measuring distances from such
G hotels which do not meet minimum standards of health and
hygiene?
11. The Division Bench noted that when it comes to the
wholesale business in liquor in the State, there was a complete
H monopoly of the State Government in as much as the business
STATE OF KERALA & ORS. v. B. SURENDRA DAS 1073
ETC. [H.L. GOKHALE, J.]
was in the hands of 3 entities, (1) Kerala State Beverages
A
. (Manufacturing and Marketing) Corporation Limited, (2) Kerala
State Civil Supplies Corporation Limited and (3) Kerala State
Co-operative Consumer Marketing Federation Limited. The
Court noted that all these 3 Government companies were
together running around 400 shops, in the State having FL 1
licenses. The shops with these licenses sell liquor, in the form
B
of unopened bottles, which is not to be consumed on the
premises. These are the shops which have the highest sale of
liquor, and the consequence of it in any case is the high
consumption of liquor. The Court also noted that the c
Government earned huge revenue from this sale, and the State
Government's annual collection was over 7000 crores. lfthese
sales by the shops run by the State are to be permitted, why
should the privately owned restaurants and bars not be
permitted to vend liquor?
D
12. The Division Bench was of the view that whereas on
the one hand, the policy of the State perpetuated the monopoly
of the existing hotels having three star or higher classification,
on the other hand by preventing new star hotels from coming
up, it would encourage consumption of spurious liquor. The
E
Court was of the view that there was no distinction between the
existing three star hotels and the new three star hotels, to be
opened. Besides most of these hotels were set up in areas
where there was a thriving tourism business like the Kovalam
Beach near Thiruvanantapuram. The decision to set up hotels
F
ought to be left to the hoteliers. The State Government will defeat
the tourism policy by introducing, by amendment, the distance
rule. For all these reasons the Court held that the two
amendments were discri.minatory, and will not achieve ttie
policy which they intended to achieve. The Court, therefore, held
G
the two amendments to be bad in law and unco.nstitutional.
13. Learned senior counsel, Mr. V. Giri assist~d by Mr.
Ramesh Babu, learned counsel, has appeared for the
appellants. He has been supported by Mr. P.K. Bali, learned
H
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SUPREME COURT REPORTS
[2014] 3 S.C.R.
A senior counsel appearing for the Kerala Pradesh Madhya
Virudh Samithy (i.e. committee opposing consumption of liquor
in the area of Kerala). Senior counsel Mr. Mukul Rohtagi,
Chander Udai Singh, Krishnan Venugopal and others have
appeared for the respondents and the interveners.
B Submissions on behalf of the appellants:-
14. The principal submission of Mr. Giri, as well as Mr.
Bali, has been that the consumption of liquor is the highest in
the State of Kerala, as compared to all other states in India.
C Chronic diseases are on the rise due to the excessive
consumption of alcohol. The amendments in Rule 13(3) of the
Foreign Liquor Rules are effected to bring in force the Abkari
Policy of the Government, with a view to bring down the sale
and distribution of liquor within the State. Mr. Giri highlighted
D the objectives of the Abkari Policy framed from the year 20112012 (These objectives have already been referred to in
paragraph 7 above). It was submitted that trading in liquor is
not a Fundamental Right as held in Khoday Distilleries (supra),
and the effect of the policy decision taken by the State is to be
E considered having regard to the provisions contained in Article
47 of the Constitution of India, as also the power of the State
to regulate and control the trade in liquor in terms of the
provisions of the Abkari Act.
15. It was pointed out by Mr. Giri that the revised policy
F was introduced by the Government foreseeing the ill effects of
increase in the consumption of liquor, and with the intention of
reducing it in a phased manner. The amendments have been
brought about for that purpose as a part of the social
commitment to the public at large. The Abkari Policy has been
G framed from 1992 onwards as follows:-
"(iJ
In 1992, with the intention of reducing the number
of bar hotels, Government decided to restrict grant
of FL-3 Licences to only hotels having two star
H
and above.
STATE OF KERALA & ORS. v. B. SUREN ORA DAS 1075
ETC. [H.L. GOKHALE, J.]
(ii)
By 1996 Abkari policy the Government decided to
A
ban sale of Arrack with effect from 01.04.1996.
(iii)
In 2002 as per the Abkari policy of 202, an
amendment was brought in the Rule restricting
grant of FL-3 Licence to only hotels having 3 star 8
and above classification.
(iv)
In continuation of the policy of the Government to
reduce sale and distribution of Liquor, Abkari
policy of 2011 was announced interalia restricting
issue of FL-3 Licence to only having 4 star and C
above classification."
Thereafter, the distance rule has been brought in 2012 by
adding Rule (3E) in Rule 13. It was. submitted that all these
changes in the rules have been made with the object of 0
gradually reducing the sale and distribution of liquor in the
State.
16. Mr. Giri emphasized the observations in sub-para (c)
and (d) of para 60 of Khoday Distilleries (supra) to the following
effect:-
E
"(c) Potable liquor as a beverage is an intoxicating and
depressant drink which is dangerous and injurious to
health and is, therefore, an article which is res extra
commercium being inherently harmful. A citizen has,
F
therefore, no fundamental right to do trade or business
in liquor.