M/S. Down Town Temptation Private ... vs Additional General Secretary
2023 Latest Caselaw 603 Cal

                IN THE HIGH COURT AT CALCUTTA
                       Constitutional Writ Jurisdiction
                               Appellate Side


Present :-

The Hon'ble Justice Moushumi Bhattacharya


                              W.P.A 17757 of 2022

       M/s. Down Town Temptation Private Limited and Another

                                     vs.

          Additional General Secretary, Finance Department,

                      Government of W.B. and Others.



For the petitioners                        :    Mr. Soumya Mazumder, Adv.
                                                Mr. Arindam Jana, Adv.
                                                Mr. Saptarshi Banerjee, Adv.
                                                Mr. Somosh Ghosh, Adv.


For the State                              :    Mr. Anirban Ray, Ld. G.P.
                                                Mr. Raja Saha, Adv.
                                                Mr. Debashis Ghosh, Adv.
                                                Mr. Amit Kr Ghosh, Adv.
                                                Mr. Varun Kothari, Adv.


Last Heard on                              :    22.12.2022

Delivered on                               :    19.01.2023.
                                              2


Moushumi Bhattacharya, J.

1. The petitioners are aggrieved by three orders dated 15th December, 2020,

3rd August, 2021 and 21st June, 2022 in the matter of rejection of the renewal

of Excise Licenses of the petitioner no. 1. The first two orders are of the Excise

Commissioner and the last order is of the Additional Chief Secretary, Finance

Department, Government of West Bengal.

2. The renewal of Excise License pertains to three restaurants-cum-bars

namely, Spice Garden, located at VIP Road and Chinar Park and Hotel Down

Town at Teghoria. All three establishments enjoyed Excise License from 2001

onwards. The petitioner applied for renewal in March 2017. The petitioners

approached the Excise Commissioner for renewal of Excise License for the

three establishments. The proceeding resulted in the first impugned order of

15th December, 2020 citing an objection received from the Bidhannagar Police

thereby calling for a fresh report from the Commissioner of Police,

Bidhannagar. The petitioner approached the Court by way of an earlier writ

petition being WPO 201 of 2021 which was disposed of by a direction on the

Excise Commissioner to dispose of the appeal under the provisions of The

Bengal Excise Act, 1909, within a certain time frame.

3. The second impugned order of 3rd August, 2021 was passed by the

Excise Commissioner whereby the petitioner's application for renewal of Excise

License was rejected.

4. The third impugned order dated 21st June, 2022 deals with the question

of renewal of the Excise License of all three establishments of the petitioners,

namely, the two Spice Garden restaurants and Hotel Down Town.

5. The consistent finding of the Excise Commissioner and the Additional

Chief Secretary is commission of offences under the Indian Penal Code and The

Immoral Traffic (Prevention) Act, 1956 in the concerned restaurants. The other

finding is of one Jagjit Singh being involved with the affairs of the three

establishments and pendency of cases against the said Jagjit Singh.

6. Learned counsel appearing for the petitioners submits that the pendency

of judicial proceedings or Police Reports cannot form the basis of a rejection of

an application for renewal of Excise License. Counsel relies on the provisions of

The Bengal Excise Act, 1909 and The West Bengal Excise (Selection of New

Sites and Grant of License for Retail Sale of Liquor and Certain Other

Intoxicants) Rules, 2003 for this purpose. Counsel submits that the State

cannot give preferential treatment to those on a similar footing to that of the

petitioners.

7. The learned Government Pleader appearing for the State respondents

relies on the Police Reports which were before the authorities at the time of

rejection of renewal of the Excise Licenses. Counsel stresses on the immoral

activities being carried on in the three restaurants of the petitioners and

submits that this is a fit case for refusing renewal of license as there is a

question of law and order. Counsel also places emphasis on the activities of

Jagjit Singh in coercing girls into prostitution in the three premises. Counsel

urges the Court to lift the corporate veil of the three establishments to

ascertain the involvement of Jagjit Singh in the day to day affairs of the

restaurants. It is further submitted that the petitioners' liquor license expired

in 2017 and hence the petitioners would have to rely on the Rules which were

in existence at the relevant point of time.

8. The question before the Court is whether the impugned orders,

particularly the order dated 21st June, 2022 rejecting the petitioner's

application for renewal of Excise Licenses on and from the year 2017-2018,

were in consonance with the Act of 1909 and the relevant Rules framed

thereunder. The State authorities rejected the application for renewal primarily

on the ground of immoral activities taking place in the restaurants and the part

played by Jagjit Singh, a relative of two of the directors of the establishments,

in commission of criminal activities. The State authorities relied on Police

Reports including of 13th December, 2016 and 23rd December, 2016 to arrive at

the impugned findings.

9. The Bengal Excise Act, 1909 is the governing statute for grant and

renewal of Excise License. Section 20 of the Act read with Rule 6 of The West

Bengal Excise (Selection of New Sites and Grant of License for Retail Sale of

Liquor and Certain Other Intoxicants) Rules, 2003, governs, in particular, the

terms and conditions of an Excise License. The expression "License" has been

defined under Rule 3(vi) to mean a license granted under the Act for the retail

sale of liquor or any other intoxicant to which the 2003 Rules apply. The Rules

contain specific forms/formats detailing the terms and conditions for grant of

license. Section 31 of the Act gives discretion to the Collector to grant a license

for the retail sale of spirit at the existing site for the next period of settlement

on the expiry of the period of validity of the license in accordance with the

prescribed conditions. The grant of license is subject to the direction of the

State Government or the Excise Commissioner. Section 85 of the Act empowers

the State Government to make Rules for carrying out the objects of the Act or

any other relevant law relating to excise-revenue. Section 86 empowers the

State Government to make Rules for regulating the manufacture, supply or

storage of any intoxicant including prescribing restrictions under which a

license may be granted and the particulars to be contained in licenses [section

86(9)and (10)].

10. Rule 14 of the 2003 Rules - "Grant of license at an existing site for the

next period of settlement" - framed under the Consolidated Rules under section

85 of the Act - prohibits grant of licenses to the persons enumerated under the

proviso to Rule 14(2). The proviso is set out below.

"14. Grant of license at an existing site for the next period of settlement. - ......................

(2) On receipt of the application referred to in sub-rule (1) along with the requisite fees and other sums payable and documents, and Collector shall grant license to the existing holder for the next period of settlement.

Provided that the Collector may refuse to grant a license to the existing holder for the next period of settlement if such holder -

(a) has been convicted by a criminal court for commission of non-bailable offence, or

(b) has committed serious violation of the terms and conditions of the license, or

(c) is a defaulter in the payment of excise revenue to the Government.

Provided further that where the Collector refuses to grant license to an existing holder for the next period of settlement, he shall record the reasons for doing so and intimate the fact to the Excise Commissioner."

11. While Rule 14(1) and (2) deal with grant of license by the Collector on an

appropriate application accompanied with the requisite fees, the proviso to Rule

14 authorises the Collector to refuse licenses only to persons who have been

convicted by a criminal Court and that too for commission of a non-bailable

offence. This is a non-exhaustive condition. Proviso (a) under Rule 14(2) is

relevant to the present case with reference to the allegations made against

Jagjit Singh. The impugned orders do not mention the petitioners violating any

of the terms and conditions of the license or the petitioners being a defaulter in

the payment of the excise-revenue to the Government.

12. Jagjit Singh resigned as a director of the Company (owning the three

establishments) in 2005. Jagjit Singh is a family member of two of the directors

of the Company. The impugned orders allege that Jagjit Singh continues to be

involved in criminal activities inside the three establishments despite his

resignation from the company. The orders however do not contain any

statement of Jagjit Singh being convicted under any offence which are allegedly

being committed inside these restaurants. The proviso makes it clear that not

only must there be a conviction of an existing license holder by a criminal court

but also that the conviction must be in relation to commission of a non-

bailable offence as defined under The Code of Criminal Procedure, 1973.

Hence, for refusing a grant of license to an existing licensee, the Collector must

be satisfied that clauses (a), (b), (c) of the proviso to Rule 14(2) have been

satisfied.

13. In the absence of any conviction of Jagjit Singh or any of the other

existing licensees connected with the three restaurants, it is arguable whether

the Collector could have refused renewal of the licenses to the three

restaurants by the impugned order dated 15th December, 2020 as confirmed in

the impugned orders of the Excise Commissioner on 3rd August, 2021 and of

the Additional Chief Secretary on 21st June, 2022.

14. Moreover, section 51 of the 1909 Act prohibits certain unlawful acts by

the licensed vendor or his employees or any person acting on his behalf. The

prohibition under section 51(1) and (2) extends to certain kinds of activities

including drunkenness, intoxication, disorderly conduct or even permitting a

person who has been convicted of a non-bailable offence or who are "reputed

prostitutes" (reflective of the vintage of the statute) to remain in the premises. It

is also relevant that sections 74, 75, 76, 77 and 78 of the Act also confer power

on the Collector and Excise Officers to take on the duties of the Police and Law

Enforcement agencies for the purpose of preventing the commission of offences

in the licensed premises. These sections are contained in Chapter IX of the Act

which deals with "Detention, Investigation and Trial of Offences and

Procedure".

15. Read together, the relevant sections of the Act and the 2003 Rules not

only provide for policing within the precincts of a licensed premises to check

immoral activities but also specific and non-exhaustive conditions for which a

license may be refused to an existing license holder. The 2003 Rules make it

clear that a license can be refused only on the conditions under the proviso to

Rule 14(2) and on no other ground.

16. The argument of the State with regard to Jagjit Singh is this; though

Jagjit Singh exited the petitioner no. 1 Company in 2005, Jagjit Singh

continues to control the Company through his wife and son who are presently

the Directors of the petitioner no. 1 Company. Hence, the argument of the

State for lifting of the corporate veil to find out who is in actual control of the

petitioner no. 1 Company. The Court is however of the view that the issue with

regard to Jagjit Singh relates to pendency of FIRs against him. The related

argument is of Jagjit Singh being responsible for the immoral activities carried

on in the three establishments namely Hotel Down Town and the two Spice

Garden Restaurants of the petitioners. The impugned orders point to continued

involvement of Jagjit Singh in the affairs of the three Restaurants and

pendency of criminal charges against him. It is clear that the State is seeking

to draw a connection between the immoral activities inside the restaurants and

the non-renewal of the Excise License in respect of the three establishments.

17. The concept of lifting of the corporate veil, as stated in Palmer's Company

Law and Gower's Modern Company Law, is where the corporate character of a

company of having a separate and distinct legal entity from that of its

shareholders, is being used for the purpose of committing a fraud or illegality.

The Court in such cases would ignore the corporate character and pierce the

veil to locate the perpetrator of the fraud and those who are lurking behind the

opacity of the veil of the corporate entity. The objective is to reveal the identity

of the wrongdoer and dissect the layers of the indivisible entity by focusing on

the substance and not the form. [Ref: Delhi Development Authority vs. Skipper

Construction Co. (P) Ltd.; (1996) 4 SCC 622] The presumption is of fraudulent

activity with a consequent need to lift the veil of anonymity. R vs. Seager;

(2009) Lloyd's Report FC 492 advises certain checks and balances where the

Court may only pierce the veil on certain events and not simply because it

considers it just to do so. The need to pierce the corporate veil of the petitioner

no. 1 Company may not be necessary in light of the specific findings of the

impugned order of the Addl. Chief Secretary that Jagjit Singh made various

applications on behalf of the petitioner no. 1 before the Excise Authorities.

There is also no case made out with reference to commission of fraudulent

activities by the petitioner no. 1 Company.

18. In this country a presumptive link is forged between sale of liquor,

drunkenness and illegal acts. There is also a mental construct (including

public perception) of liquor leading to commission of immoral acts such as

prostitution. The connection may have its origins in the history of the country

and in the stories recounted and circulated but more in the minds of people

who view sale and consumption of liquor and intoxicants as the starting point

of social malaise bordering on criminal acts. The Model Policy formulated by

the Union Government prohibited sale of liquor to a retail vendor within a

distance of 100 metres from any religious or educational institution or hospital

and also within a distance of 220 metres from the middle of the State /

National Highways. The logic is that consuming liquor would necessarily lead

to unruly behaviour and a risk to public safety. Seen in this context, the State's

argument is no doubt compelling; that the three restaurants are being used as

brothels and that grant of Excise License to the restaurants would lead to a law

and order problem in the concerned area.

19. This Court is however of the view that non-renewal of Excise Licenses

must be confined to and governed by The Bengal Excise Act, 1909 and the

West Bengal Excise (Selection of New Sites and Grant of License for Retail Sale

of Liquor and Certain Other Intoxicants) Rules, 2003. The Act deals

exhaustively with the conditions for refusing to continue the license of an

existing holder. The Consolidated Rules made under section 85 of the Act deal

with a vast range of situations warranting restrictions with reference to the

provisions of The Code of Criminal Procedure, 1973. Section 74 of the Act

reinforces the power of the Collector and Excise Officers to investigate any

offence punishable under the Cr.P.C in the same manner and amplitude as

may be exercised by a Police Officer. Thus, the non-renewal must only be for

the conditions/circumstances provided under the Act and the Rules.

20. The concerned authorities have been conferred the power to take effective

measures against illegal activities which may be carried on by a licensee or

committed within the licensed premises. The defence of immoral activities, even

if based on evidence, can only be used for non-renewal of a license if the

defence forms part of the relevant sections of the 1909 Act and the 2003 Rules.

Rule 14(2) read with the proviso of the 2003 Rules which has been set out

above, does not contain any restriction on the ground either of commission of

immoral activities or pendency of charges against an existing license holder.

Under the Rules, the license holder (a) must be convicted by a criminal court

and (b) convicted for commission of an non-bailable offence. The State has not

said that Jagjit Singh satisfies either of these two conditions.

21. Further, the order dated 20th February, 2019 of the Finance Department

of the State for standardising the processes related to application for grant of

NOC by Police Commissionerates in West Bengal in connection with grant of

Excise Licenses under the Act of 1909, as amended, makes it clear in Clause 3

that clearance from Police Commissionerates will not be required for renewing

an existing Excise License. Hence the repeated reliance on Police Reports in

the impugned orders are contrary to the order of the Finance Department.

22. The impugned orders were passed after 20th February, 2019. The

argument of the State that the petitioners cannot take advantage of the order of

20th February, 2019 since the petitioner's license had expired in 2017 is

contrary to at least two decisions place before the Court. In Somdev Kapoor vs.

State of West Bengal; (2014) 14 SCC 486 the Supreme Court opined that the

law previously laid down was that the Rules which are prevalent on the date

when the application is considered are to be applied and not the date when the

application is made. A similar view was taken by a learned Judge of this Court

in Gopal Garai vs. State of West Bengal; 2016 (1) CHN (Cal) 174. In any event

the petitioner's application for renewal of the Excise License was pending since

2017 and the authorities would hence be under an obligation to consider the

order which came in 2019 for renewal of existing excise licenses. The

authorities can by no means say that the order of 2019 would not be applicable

in the facts of the present case.

23. The alleged discrimination of the petitioners is also relevant to the

expectation of equal treatment under the right guaranteed in Article 14 of the

Constitution of India. The writ petition contains a document where other

licensees/establishments have been granted licenses despite similar allegations

being made against such entities. The petitioners have averred that entities in

the list of the document dated 12.6.2017 have been granted licenses despite

pending cases against the entities under The Immoral Traffic (Prevention) Act.

This Court is of the view that although the petitioners cannot claim a

fundamental right under Article 19(1)(g) to trade in liquor [Ref: State of Tamil

Nadu vs. K. Balu; (2017) 2 SCC 281)] the petitioners can certainly urge that the

petitioners have been discriminated against by reason of differential treatment

meted out to the petitioners. The Supreme Court in Gwalior Distilleries Private

Limited vs. State of Madhya Pradesh; (2020) 12 SCC 690 relied on State of M.P

vs. Nandlal Jaiswal; (1986) 4 SCC 566 to hold that although no one can claim

to carry on trading in liquor, the State cannot escape the rigour of Article 14

and cannot act arbitrarily. The facts in the cases cited on behalf of the State

are also distinguishable to the present facts. Sayyed Ratanbhai Sayeed (Dead)

Through Legal Representatives vs. Shirdi Nagar Panchayat; (2016) 4 SCC 631

and K. Balu were concerned with grant of license to shops near highways and

encroachment on highways.

24. There is little doubt that the grant of a liquor license is a privilege as

opposed to a right; the authority conferred with the power of grant or refuse a

liquor license must however act within the equality mandate of the

Constitution of India. If one entity has been deprived of a license on the ground

of violation of the Act or the Rules, other entities must be visited with the same

consequences subject to existence of similar facts in both the cases. The public

interest argument and the supremacy of public consideration over private

rights (in the writings of Cicero: "the good of the people is the chief law") is of

course the guiding light but cannot be used to defeat the express provisions in

the governing Act and the Rules. The State can only rely on an express and

existing provision in an Act to deprive a person or citizen of his/her valuable

legal rights. For instance, Rule 8 of the Central Civil Services (Pension) Rules,

2021 expressly gives the right to the President to withhold pension or gratuity

or both either in full or in part whether permanently or for a specified period.

The 1909 Act and the 2003 Rules do not contain any provision which is similar

to Rule 8 of the CCS Rules.

25. In conclusion, the State, in its sovereign powers and functions, has the

duty to prevent commission of offences under The Indian Penal Code, 1860 and

The Immoral Traffic (Prevention) Act, 1956 among other acts and to uphold

public order. The State has the means and the wherewithal to deploy law

enforcement agencies including the Police to prevent breach of public peace.

The State must however act within the legislative intendment of a statute in the

matter of grant of licenses to persons and entities under the provisions of The

Bengal Excise Act, 1909 and the 2003 Rules. This is particularly non-

negotiable where the prohibitions and exceptions have specifically been carved

out in the Act. The State cannot add to the legislative object or curtail the right

of an entity where the Act and the Rules do not provide the basis for such

curtailment. The State is also under an obligation to preserve the equality and

fairness mandate in the Constitution and is hence precluded from applying

different standards to different entities on the pretext of ensuring a crime-free

environment in the establishments where liquor is sold and consumed. The

Police are there to prevent commission of offences. The Reports of the Police

however cannot be a ground to refuse the renewal of license to an existing

license holder when the Act/Rules and the 20th February, 2019 Order of the

Finance Department of the State specifically debars the State from doing so.

26. The above reasons persuade this Court to grant the reliefs prayed for.

WPA 17757 of 2022 is accordingly disposed of by quashing the impugned

orders dated 15th December, 2020, 3rd August, 2021 and 21st June, 2022. The

concerned respondents are directed to revisit the applications for renewal of

licenses of the petitioners for the three establishments and pass reasoned

orders in accordance with the 1909 Act, the 2003 Rules, the order of 20th

February, 2019 and any other relevant Rules framed under the Act which may

be applicable to the facts of the case. The authorised representative/s of the

petitioners shall be heard before passing of the reasoned orders. The reasoned

orders shall be passed within 4 weeks from the date of this judgment and shall

be communicated to the petitioners within a week from the date on which the

reasoned orders are passed. The authorities are expected to act within the

bounds of fairness and non-discrimination.

27. The writ petition is disposed of accordingly.

Urgent Photostat certified copies, if applied for, be supplied to the

respective parties upon fulfillment of requisite formalities.

(Moushumi Bhattacharya, J.)