M/S Hotel Welcome vs Deputy Commissioner
2023 Latest Caselaw 7761 Kant

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                                                                 NC: 2023:KHC-D:13386
                                                                     WP No. 106079 of 2015




                                   IN THE HIGH COURT OF KARNATAKA, DHARWAD
                                                        BENCH

                                   DATED THIS THE 17TH DAY OF NOVEMBER, 2023

                                                        BEFORE
                              THE HON'BLE MR JUSTICE ANANT RAMANATH HEGDE
                                   WRIT PETITION NO. 106079 OF 2015 (EXCISE-)

                              BETWEEN:

                              M/S. HOTEL WELCOME
                              (BAR AND RESTAURANT) CL-7,
                              CTS NO.1610/2B, BANK ROAD,
                              GADAG, DISTRICT GADAG.
                              REP. BY ITS PARTNER
                              SMT. PREMILABAI RAMAKRISHNA KABADI,
                              AGED ABOUT 65 YEARS, OCC: BUSINESS,
                              R/O. GADAG-BETAGERI, DISTRICT GADAG.
                                                                               ...PETITIONER
                              (BY SRI RAJASHEKHAR BURJI, ADVOCATE)

                              AND:

                              1.     DEPUTY COMMISSIONER
                                     DISTRICT GADAG, GADAG.
           Digitally signed
           by
           MOHANKUMAR
MOHANKUMAR B SHELAR
B SHELAR
           Date:
           2023.11.21
           13:22:09 +0530
                              2.     DEPUTY COMMISSIONER OF EXCISE,
                                     DISTRICT GADAG, GADAG.               ...RESPONDENTS

                                     (BY SRI SHIVAPRABHU HIREMATH, AGA)

                                   THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227
                              OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE ORDER
                              BEARING EXE/IML/CR/71/2012-13 DATED 15.05.2014 PASSED BY
                              THE 2ND RESPONDENT PRODUCED AT ANNEXURE-A AS ILLEGAL
                              AND DIRECT THE 2ND RESPONDENT TO CONSIDER THE CASE OF
                              THE PETITIONER UNDER RULE 17-A OF THE KARNATAKA EXCISE
                              LICENSES (GENERAL CONDITION) RULES 1967.
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                                        NC: 2023:KHC-D:13386
                                           WP No. 106079 of 2015




      THIS PETITION, COMING ON FOR FURTHER HEARING, THIS
DAY, THE COURT MADE THE FOLLOWING:

                             ORDER

Heard the learned counsel for the petitioner as well as

learned AGA for the respondents-State.

2. This petition is filed challenging the order dated

15.05.2014 passed by the 2nd respondent. In terms of the said

order, the 2nd respondent has imposed transfer fee of

Rs.2,15,000/- and additional fee of Rs.32,250/- totaling to

Rs.2,47,250/- on an application filed by the petitioner for

renewal of CL-7 license.

3. Admittedly, CL-7 licence was initially issued in favour

of the petitioner which is a partnership firm constituted in the

year 2000. The Partnership Deed is produced at Annexure-B. It

is evident from the said Partnership Deed that there were four

partners, when the partnership firm was constituted.

4. It is the case of the petitioner that one of the partners

namely Ramakrishnasa Ramachandrasa Kabadi died on

30.11.2006. The Partnership Deed provides that in the event of

death of any of the partners, the partnership shall continue and

surviving partners shall admit the legal heir or such others as

NC: 2023:KHC-D:13386 WP No. 106079 of 2015

may be decided or agreed by the continuing partners, as a

partner in place of the deceased partner. Admittedly, the wife

of the deceased partner is inducted to the said partnership.

The newly constituted Partnership Deed is produced at

Annexure-F.

5. The application seeking renewal of CL-7 licence in the

name of partnership firm is rejected in terms of Annexure-A on

the premise that induction of legal representative of the

deceased partner amounts to change of composition of the

partnership firm. Thus, the respondent is of the view that it

amounts to transfer of the licence and not just renewal of

licence. The authority is of the view that the fee chargeable in

such situation is governed by Rule 17-B of the Karnataka Excise

Licences (General Conditions) Rules, 1967 (for short, 'the

Rules, 1967').

6. Learned counsel for the petitioner would contend that

Rule 17-A of the Rules, 1967 provides that in the event of

death of the licensee, during the currency of the licence, the

Deputy Commissioner may, on an application by the legal heirs

of the deceased licencee with the previous sanction of the

NC: 2023:KHC-D:13386 WP No. 106079 of 2015

Excise Commissioner, transfer the licence in favour of the legal

representatives and he would also refer to Rule 17-B of the

Rules, 1967 and would submit that Rule 17-B of the Rules,

1967 does not apply the present set of facts. Thus, it is urged

that the authorities were not justified in demanding the higher

licence fee by invoking Rule 17-B of the Rules, 1967. He would

further submit that since the Partnership Deed provides for

inducting the legal heirs of the deceased partner, for all

practical purposes, the composition is the same. The

application for renewal of existing licence in the name of the

partnership firm should be treated as the application by the

same partnership firm which was granted licence.

7. Learned AGA Sri Shivaprabhu Hiremath appearing for

the respondents-State would contend that the impugned order

is appealable under Section 61 of the Karnataka Excise Act,

1965. It is his further submission that Rule 17-A of the Rules

1967 does not apply to the partnership firm and it only applies

to the individual licencee or lessee. The authority justified in

demanding higher licence fee by invoking Rule 17-B of the

Rules, 1967. He would also refer to the Judgment of this Court

NC: 2023:KHC-D:13386 WP No. 106079 of 2015

dated 19.07.2012 passed in Writ Petition No.17393/2012 and

connected matters.

8. Learned counsel for the petitioner in reply would

contend that the petition is filed in the year 2015 and for the

last eight years respondents have not raised any objections

relating to the alternative remedy and as such objection should

not be entertained at this stage. It is the further contention of

the learned counsel for the petitioner that in terms of the

Judgment referred in Writ Petition No.19893-95/2013 (Excise)

the issue is squarely covered and this Court has taken a view

that in case of death of a partner of partnership firm and the

partnership firm (after inducting the legal heir of the deceased

partner) applies for renewal of license, should not be construed

as an application by a different entity and it should be

construed as an application by the same entity which was given

licence earlier.

9. This Court has considered the contentions raised at the

bar.

10. As far as the contention relating to the alternative

remedy being available to the petitioner, this Court is of the

NC: 2023:KHC-D:13386 WP No. 106079 of 2015

view that this contention cannot be permitted to be raised after

the eight years in the facts and circumstances of this case.

Hence, exercising the discretion vested with the Court, the

objection relating to the alternative remedy is overruled and

petition is considered on merit.

11. In the judgment cited by the learned AGA appearing

for the respondents-State, this Court has observed in

paragraphs No.21 and 22 of the said Judgment as under:

"21. If a licence is issued in the name of a firm consisting of specified persons as its partners on the basis of the details furnished at the time when the application is filed and if such firm, later on, undergoes change in its constitution/composition or control or management, then it may result in the licence being impliedly transferred in favour of the re-constituted partnership firm. Merely because some of the old partners have continued in the re-constituted firm, may not be a defence to avoid the rigour of Rule 17-B. It all depends on the facts and circumstances of each case. If a partner is newly inducted and he has no real role in the management and control of the existing firm in whose favour the licence is granted, and where such induction does not in any manner bring about major change in the shares

NC: 2023:KHC-D:13386 WP No. 106079 of 2015

held by the partners, then a defence will be open to the firm to say that there is no implied transfer. But, where in a given case induction of new partners has resulted in implied transfer of the management and control in favour of new partners as well, then the rigour of Rule 17-B cannot be avoided.

22. Rule 17-B is required to be strictly construed. It has to be given its full effect. It has to be borne in mind that the lecencee has no right to transfer the licence. He cannot achieve this object by camouflaging his actions by resorting to re- constitution of the firm. Whether the action is a matter that depends on the facts and circumstances of each case and the competent authority has to examine the same."

12. On a reading of the aforementioned paragraphs it is

evident that whether induction of a legal representative of a

deceased partner, as a partner of the partnership firm,

amounts to creation of a new firm, and the licence

issued/renewed in favour of such firm should be construed as a

licence to a new firm, and whether such new licence

issued/renewed amounts to transfer of licence attracting higher

fees, depends on the facts of each case. The co-ordinate bench

of this Court has not held that in the event of partnership being

NC: 2023:KHC-D:13386 WP No. 106079 of 2015

reconstituted on account of induction of legal representative of

a deceased partner, should be construed as a new entity for the

purpose of charging higher fees while renewing licence in all

circumstances.

13. Coming to the facts of this case, it is evident that the

partnership firm came into existence in the year 2000.

Thereafter, partnership firm obtained a CL-7 license. The said

licence was in force in the year 2006 when one of the partners

died. The wife of the deceased partner was inducted in place of

deceased partner. Rest of the partners continued to be the

partners of the firm. The reconstituted Partnership Deed

reveals these facts. The only change in the composition of the

firm is on account of death of one of the partners and induction

of the legal representative of the deceased partner which is

permitted under the partnership deed.

14. It is also relevant to note that since 2006 till today

the CL-7 licence is renewed. This being the case, the

contentions raised by the State based on the order passed in

Writ Petition No.17393/2012 and connected matters do not

come to the aid of the respondents-State. On the other hand,

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the observations made by the co-ordinate bench of this Court in

the judgment cited by the learned AGA would support the stand

of the petitioner.

15. It is relevant to note the licence was issued since

2006 to 2015 in the name of the firm which continued to exist

even after the death of one of the partners. It is not the finding

of the respondent/authority that the change in the composition

of the firm on account of induction of the wife of one of the

partners was with an intention to transfer the licence to the

newly inducted partner by surrendering the rights of the

remaining partners. The application is renewed by charging

higher fees under Rule 17-B of Rules, 1967 on the premise that

the induction of the wife of the deceased partner changes the

composition of the firm and the renewal of licence amounts to

transfer of licence to a new firm.

16. In the judgment cited by the learned counsel for the

petitioner, a co-ordinate bench of this Court in paragraph

Nos.10 and 11 has held as under :

"10. A bare reading of the Rule 17-A of the Rules makes it abundantly clear that, in the event of the death of a partner in a partnership firm, a licensee, during the currency of the licence, the

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NC: 2023:KHC-D:13386 WP No. 106079 of 2015

Deputy Commissioner may on an application by the legal heirs of the deceased with the previous sanction of the Excise Commissioner, transfer the licence in their favour.

11. If that is so, then the legal representative of the deceased K.B.Motekar is entitled to be inducted as a partner in the partner

- firms and the Deputy Commissioner is bound by Rule 17-A to transfer the licences in respect of the three firms. In that view of the matter, Rule, 17-B has no application to the facts of the case."

17. On a reading of the aforementioned judgment and on

appreciation of the facts of the case, it can be concluded that

there are no materials to hold that the composition of the

partnership firm has changed to such an extent to construe the

new partnership as a new entity for the purpose of issuance of

licence under the Act of 1965 and Rules, 1967. No materials

are placed to hold that the change of composition of the

partnership firm by inducting the wife of the deceased partner

is done with an intention to circumvent the provisions of law

attracting higher renewal charges.

18. It is also relevant to note that from the year 2000 till

today, the licence is issued/renewed in the name of the

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petitioner firm. And admittedly, there was a licence in the

name of the partnership firm when one of the partners died.

This being the position, this Court has to hold that the order

passed in Writ Petition No.19893-95/2013 (Excise) will come to

the aid of the petitioner, in the sense that the reconstitution of

the partnership firm on account of death of one of the partners

cannot be construed as a change, to term it as a transfer of

licence, when application is filed for renewal.

19. At this juncture, learned AGA appearing for

respondents-State would submit that under the applicable

rules, the change of constitution has to be reported to the

licensing authority and necessary fee has to be charged.

However, no provision of law is pointed out to show the

consequence of not reporting the change in the composition of

the partnership firm, as noticed in the facts of the case where

one of the partners of the firm has died and the partnership

firm has continued to function by seeking renewal of licence.

20. In terms of the impugned order, the licensing

authority has charged fee of Rs.2,15,000/- towards transfer of

licence, which is impermissible in view of the discussions made

above and collection of Rs.32,250/- towards additional licence

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fee, is also impermissible.

21. Thus, the authorities are liable to refund the excess

fees collected after retaining any fee payable under Rule 17-A

of the Rules, 1967 for renewal of licence as prevailing when the

application was filed.

21. The refund shall be made within two months from

the date of receipt of copy of this order, failing which

respondents shall pay interest at the rate of 8% per annum on

the said amount, from the date of default till the date of

repayment.

With the above observation and direction, petition is

allowed.

Sd/-

JUDGE

CKK/CT-an