Karnataka High Court
Parashiva vs The Commissioner Of Excise on 7 February, 2024
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
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WP No. 1575 of 2024
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 7TH DAY OF FEBRUARY, 2024
BEFORE
THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION NO. 1575 OF 2024 (EXCISE)
BETWEEN:
PARASHIVA
S/O SOMEGOWDA,
AGED ABOUT 66 YEARS,
REPRESENTED BY HIS
WIFE AND POWER OF
ATTORNEY HOLDER,
SMT. T. GEETHA, W/O PARASHIVA,
AGED ABOUT 58 YEARS,
R/O NO. 3446, 7TH CROSS,
R.P. ROAD, NANJANAGUDU TOWN,
MYSURU DISTRICT - 560 451.
...PETITIONER
(BY SRI. MOHAN BHAT.,ADVOCATE)
AND:
Digitally
signed by
VANDANA S 1. THE COMMISSIONER OF EXCISE
Location: IN KARNATAKA
HIGH COURT
OF NO.27, 2ND FLOOR,
KARNATAKA
TTMC, SHANTHINAGAR BUS TERMINAL,
SHANTHI NAGAR,
BENGALURU-560027.
2. THE DEPUTY COMMISSIONER OF EXCISE
CHAMARAJANAGAR DISTRICT,
CHAMARAJANAGAR - 560 020.
...RESPONDENTS
(BY SRI.SHAMANTH NAIK.,ADVOCATE)
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WP No. 1575 of 2024
THIS WP IS FILED UNDER ARTICLES 226 AND 227
OF THE CONSTITUTION OF INDIA PRAYING TO QUASHING
THE IMPUGNED ORDER DATED 13.10.2023 PASSED BY
THE R-1 IN NO. ECI/O4/IML/CRN/19-20 MARKED AT ANNX-J
AND CONSEQUENTLY QUASH THE ORDER 20.10.2023 IN
NO. EXE/GPT/IML/CL9/3/2023-24 MARKED AT ANNX-K;
DIRECTING THE RESPONDENT TO PERMIT THE
PETITIONER TO SHIFT THE LICENSE FROM THE EXISTING
PREMISES NO. 512 GUNDLUPET CHAMARAJANAGAR DIST
TO NO. 237/3, SAGADE VILLAGE CHAMARAJNAGAR TALUK
AND DIST IN TERMS OF THE REPRESENTATION OF THE
PETITIONER DATED 25.09.2023 AS PER ANNX-E.
THIS PETITION, COMING ON FOR PRELIMINARY
HEARING, THIS DAY, THE COURT MADE THE FOLLOWING:
ORDER
In this petition, the petitioner has sought for quashing
of the impugned communication dated 13.10.2023 passed
by the respondent No.1 at Annexure-J and the impugned
order dated 20.10.2023 at Annexure-K of the respondent
No.2.
2. Heard the learned counsel for the parties and
perused the material on record.
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3. The material on record discloses that the
petitioner is the husband of one Smt. K Geetha and had
executed a Power of Attorney in her favour on 03.06.2016
empowering and authorizing her to conduct day to day
business in respect of the subject CL-9 license in relation to
Sandesh Bar and Restaurant at Gundlupet Town. On
07.01.2019, the petitioner having gone missing, a
complaint was lodged and Police notice was issued.
Subsequently, on 06.07.2023, the aforesaid Smt. Geetha
representing her husband as Power of Attorney holder got
the subject license renewed on the same terms as it was
renewed for the previous years. However, she made an
application on behalf of her husband/licensee to shift the
license from the existing premises to a new premises by
submitting an application on 25.09.2023. The respondent
No.1 acting upon the communication from the respondent
No.2 on 13.10.2023 passed the impugned order rejecting
the request for shifting of the license from the existing
premises to a new premises on the ground that the
petitioner would necessarily have to obtain a decree from
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the competent civil Court for declaration that her husband
has died civil death as contemplated under Section 107 of
the Indian Evidence Act, 1872. Aggrieved by the impugned
order passed by the respondent No.1, the petitioner is
before this Court by way of present petition.
4. As stated supra, the sole ground on which the
respondent No.1 has issued the impugned
order/endorsement refusing to shift/transfer the subject
license from the existing premises to a new premises is by
coming to the conclusion that unless a decree is obtained
from the competent civil Court to the effect that the
petitioner had died a civil death as contemplated under
Section 107 of the Indian Evidence Act, 1872, it was
impermissible for the General Power of Attorney holder to
seek shifting/transfer of the license to a new premises.
5. In my considered opinion, the said
question/issue is contrary to the Judgment of this Court in
the case of 'Geetha v. State of Karnataka, by its
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Secretary, Finance Department and Others' reported in
ILR 2000 KAR 909, wherein it is held as under:
5. The question that arise for consideration is
whether granting a power of Attorney by a licence
to run the licenced business, 'perse' violates the
provisions of the Karnataka Exercise Act, 1965 or
the Rules thereunder and whether this Court, in
Mahabala's case directed cancellation of licences
in all cases where the business is managed by a
power of Attorney holder of the licencee.
6. Section 15 of the Karnataka Excise Act, 1965,
['the Act' for short] prohibits sale of intoxicants
except under the authority and subject to the terms
and conditions of a licence granted in that behalf.
Section 26 of the Act provides that every licence
granted under the Act shall be granted on payment
of such fees, for such period, and subject to such
restrictions and on such conditions, as may be
prescribed. Section 29 of the Act deals with
cancellation or suspension of licences. Clauses (a)
to (e) of Section 29 enumerate the circumstances
in which the authority granting any licence under
the Act may cancel or suspend it. Clauses (b) and
(c) which are relevant are extracted below:
b) in the event of any breach by the holder
thereof, or by any of his servants or by any one
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acting on his behalf with his express or implied
permission, of any of the terms and conditions
thereof; or
c) if the holder thereof or any of his servants or
any one acting on his behalf with his express or
implied permission is convicted or any offence
under the Act; or
[emphasis supplied]
7. The Karnataka Excise (Sale of Indian and
Foreign Liquors) Rules, 1968 ('SIFL Rules' for
short) deals with grant of licences for vending of
Indian liquor and/or foreign liquor sub-rule(9) of
Rule 9 described CL-9 licence as a licence for
Refreshment Room (Bar) for sale of Indian
liquor/foreign liquor combined with the supply of
meals or eatables. Rule 4 provides for application
for licence and Rule 5 provides for grant of licence,
after inquiry. The conditions subject to which a CL-
9 licence is granted, inter alia, provides that the
licencees shall be bound by the provisions of the
Karnataka Excise Act, 1965 and any general or
special Rules prescribed or which may, from time
to time, be prescribed thereunder. It also reiterates
that the licence may be suspended or cancelled in
accordance with the provisions of Section 29 of the
Act and that licensee or his employee shall be
liable for prosecution for breach of any of the
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conditions of the licence, under the provisos of the
Act or the rules and orders thereunder. The other
conditions relate to strength of liquor to be served,
liability to produce invoices and testing of samples
and maintenance and submission of accounts. It
also restricts the sale of liquor only to persons
supplied with meals or refreshment prepared and
served for consumption in the premises and
prescribes the opening and closing hours.
8. Rule 17 of the Karnataka Excise (General
Conditions) Rules, 1967 ('General Conditions
Rules' for short) provides that the right of retail
vend of liquor (governed by CL2 licence) shall not
be transferred by the licensee except with the
previous permission of the Deputy Commissioner.
Rule 17-A 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 with the previous
sanction of the Excise Commissioner, transfer the
licence in their favour. Rule 17-B provides for
transfer of licences. It provides that in regard to
licences issued for sale of Indian liquor or foreign
liquor or both, in Form No. Cl-1 or Cl-2 or Cl-7 or
Cl-9 under the Karnataka Excise (Sale of Indian
and Foreign Liquors) Rules, 1968, the Deputy
Commissioner may on an application by the
licensee and subject to payment of transfer fee
equivalent to the annual licence fee specified and
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with the prior approval of the Excise
Commissioner, transfer such licence in favour of
any person named by such licence, if such person
is eligible for grant of a licence.
9. A conspectus of the above provisions, that is
Sections 15 and 29 of the Excise Act, Rules 17A
and 17B of the General Conditions Rules and Rule
3(9), 4 and 5 of SIFL Rules, discloses the following
position regarding Cl-9 licences:
(i) A CL-9 licence is not transferable, except
with the permission of the licensing Authority, and
subject to payment of prescribed transfer fee.
(ii) On the death of a licencee, the licensing
Authority may transfer the licence to a legal
heir/heirs of the licencee.
(iii) A licencee is not entitled to lease out or
sublet or transfer the CL9 licence, otherwise than
in accordance with Rule 17B of General Condition
Rules.
(iv) A licencee is not required to run or
manage the business personally, but may run the
business through an Authorised Agent or servant.
10. The State has the exclusive privilege and right
of manufacturing and selling intoxicating liquor.
Grant or a CL-9 licence is a privilege or permission
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granted by the State to the licensee to sell liquor in
the manner prescribed in the licence. Parting with
the possession and control of the business
covered by the CL9 licence would amount to
transfer of such privilege and licence and such an
act without the permission of the licensing
authority, will be illegal and illative of the terms of
licence. But, if the licencee retains possession and
control, but only authorises a servant or a Agent to
manage the business on his behalf, there is no
illegality or infringement of the conditions of
licence. Infact Clauses (b) and (c) of sub-section
(1) of Section 29 contemplate the business of a
licencee being run by any Agent or servant with
the express or implied permission or authority of
the licencee.
11. A transfer of licence may be either by way of
a transfer simpliciter (that is transfer of the license
alone) or a transfer implied in or consequential
upon (a) the transfer of the business of Bar and
Restaurant covered by the CL-9 licence by way of
sale or mortgage with possession; or (b) the
licencee parting with the possession and control of
the business by way of lease sub-lease or an
Agreement of transfer and/or a power of Attorney
coupled with interest.
12. At this stage, it is necessary to refer to the
difference between General Powers of Attorney
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[simpliciter] on the one hand and Powers of
Attorney coupled with interest of irrevocable
powers of attorney on the other.
This extract is taken from Geetha v. State of
Karnataka, 1999 SCC OnLine Kar 517 : ILR
2000 Kar 909 : (2000) 2 Kant LJ 383 : (2000) 1
KCCR 693 at page 914
12.1 A General Power of Attorney is executed as a
matter of convenience. By executing such a Power
of Attorney, the executant (Principal) provides for
management/of his affairs/business/ properties, by
the agent. A power of attorney is normally
executed when the executant is not personally
able to attend to his affairs/business due to
absence or due to incapacity or other
preoccupation. The acts of the agent are binding
on the principal. In spite of the absence of the
principal (executant) granting the power of
Attorney, the possession and control of the
affairs/business remain with the principal. A
general power of Attorney granted to an Agent to
manage the business of the principle does not
create any right, title or interest in the asset or
business which is the subject matter of the power
of attorney, in favour of the Attorney Holder. Power
of Attorney is revocable at the will and pleasure of
the principal. In short, under a General Power of
Attorney simpliciter (either general or special)
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there is a mere authority to act, unaccompanied by
any interest of the agent in the subject matter of
the power of attorney. A common example of such
power of attorney is what is granted by a member
of family, to another family member to run/manage
the business/affairs of the grantor.
12.2 On the other hand, a power of Attorney
executed in pursuance of, or in furtherance of an
agreement of sale, transfer, lease etc., stand on a
different footing. Where the authority is given to an
Agent for effectuating any security or to protect or
secure any interest of the Agent, then the power of
Attorney is irrevocable during the subsistence of
such security or interest. An agency coupled with
interest or an Irrevocable Power of Attorney for
consideration, may amount to an equitable
assignment of the rights under the contract, by the
Grantor/Executant in favour of the holder of the
Attorney. But, mere use of the term 'irrevocable' in
regard to a power of Attorney does not make it
'irrevocable' unless the assignment of interest in
the subject matter the agent is anterior to, or
simultaneous with the creation of power in the
Agent/Attorney. The term 'Irrevocable' need not
necessarily mean permanent. It only means that
the Power of Attorney is not revocable at the will or
pleasure of the principal or during the subsistence
of interest in favour of the Agent, but is 'revocable'
only in the manner contemplated under the
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Agreement between the parties which led to the
execution of the Power of Attorney, or is not
revocable without the consent of the Agent. The
creation of interest in the agent or receipt of any
consideration (either past, present or agreed to be
received in future) by the principal from the agent
should be disclosed in the Power of Attorney, to
make it 'irrevocable'. In a power of Attorney
coupled with interest, the power to do the act is
accompanied by, or is in pursuance or, a right or
interest of the Agent in the subject matter on which
the power is to be exercised.
13. I may refer to the following common examples
of Powers of Attorney coupled with interest or
Powers of Attorney for consideration at this stage:
a) Where a Power of Attorney is executed by the
owner of a property in favour of a person who
agrees to purchase such property. The owner
enters in to an Agreement of sale with the
purchaser and receive full or part consideration for
the sale and delivers possession of the subject
matter of the sale in part-performance and
executes a Power of Attorney authorising the
Agent to effectively enjoy or use the property or
even to sell the property. The non-completion of
sale and execution of a Power of Attorney pending
sale, may be due to several reasons, that is non
receipt of a part of the consideration or non-receipt
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of legal clearances required for a conveyance or
even to postpone or avoid payment of stamp
duty/Taxes/Fees related to a conveyance.
b) Where a Power of Attorney is executed by the
holder of a licence, to run his business, in
pursuance of sale/transfer of the business by him.
A person running licensed business may sell the
business as a running concern or may let out the
business or grant permission to run the business
for a specified period for consideration. Either on
account of the prohibition regarding transfer of
licence, or on account of absence of provision for
transfer of licence or to avoid payment of fee for
transfer, a power of attorney may be executed by
the owner of a business or holder of a licence, in
favour of the transferee/lessee (that is, person
permitted to run the business by the owner)
enabling him to run the business.
14. In Mahabala's case, the holder of CL9 licence
appears to have granted a lease of the Hotel
without transferring the licence to the petitioner
therein. The lessee sought a licence in his own
name by way of renewal. The Deputy
Commissioner of Excise directed that the licence
be granted in favour of the original licencee, by
way of renewal. There were several litigations. The
writ petition was filed by the lessee of the Hotel
challenging the vacation of interim stay of an order
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permitting the licence holder to shift the business
to another premises. While dismissing the writ
petition, this Court observed thus:
"...If a person is not capable of running the
business himself or through his staff should not
ordinarily be entitled for any licence. Sub-letting or
sub-leasing of premises where a business is
carried on is also not permitted. In cases where it
is found that on the basis of some agreement the
business is being carried without permission of the
Commissioner, it was appropriate that even the
licence granted to the person who has permitted to
delegate his power to somebody else should have
been cancelled. No person can carry on business
of vending the liquour without a proper licence and
if vending of the liquour permitted, under such
arrangement or agreement it would frustrate the
very object of having the control over the licensee
or to make him even in some cases criminally
liable. The petitioner has no locus standi to
challenge the order of the Deputy Commissioner
for transfer of the place of business and the
petition is therefore liable to be dismissed.
It may also be observed that the Excise
Commissioner should take immediate steps in
cases like the present one where the business is
not being carried on by the licensee but by some
other person on the basis of lease agreement or
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the power of attorney or the like, then the proper
step should be to cancel the licence itself. A copy
of the order be sent to the Excise Commissioner,
for taking proper steps after making the enquiry.
Compliance report be sent within three months
from the date of receipt of copy this order."
The effect of the direction in Mahabala's case is
that if some one, other than the licence holder, is
running the business (Bar and Restaurant) in his
own right, in pursuance of any lease, agreement
arrangement, power of Attorney, then steps should
be taken to cancel the CL9 licence. The decision
does not direct that wherever a general Power of
Attorney is executed, the licence should be
cancelled. It is no doubt true that this Court has
made a passing observation that "if a person is not
capable or running the business himself or through
his staff should not ordinarily be entitled for any
licence." These words refer to the stage of granting
or renewing a licence and apparently intended to
discourage persons obtaining licences in the
other's names. But the observation is not intended
to prohibit a licencee from giving a Power of
Attorney to a brother, son, relation or friend to
manage the business. A person running a
business through a power of Attorney Holder, in
law runs the business "himself". When Companies
and Firms can apply and obtain licences and run
the business through their Authorised Agents or
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Employees, there is nothing per se objectionable
about a person giving a General Power of Attorney
to his family member or friend, or an employee, to
run a Bar and Restaurant. A company or firm or
individual may own a chain a Restaurants all over
the country or State and may grant a power of
attorney to an Agent/employee to look after the
day to day management and to apply for licence
every year. Mere execution of a power of Attorney
by the licensee to a family member or employee or
friend, cannot lead to suspension or cancellation of
the licence or refusal to grant or renew the licence.
15. There is no fundamental right to carry on trade
or business in liquor. The State has the power to
effectively regulate the various activities relating to
intoxicants. As observed by the Supreme Court in
Har Shankar v. Deputy Excise & Taxation
Commissioner [AIR 1975 SC 1121.] :
"The wider right to prohibit absolutely would
include the narrower right to permit dealings in
intoxicants on such terms of general application as
the State deems expedient."
In Jagadale & Sons v. State of Karnataka [ILR
1989 KAR 101.] , a Division Bench of this Court
observed:
"The business is liquor is not per se lawful
except when carried on under licence or permit
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and thus no right inheres in any individual to carry
on trade in noxious or dangerous drugs. The
moment the licence expires, cancelled or
withdrawn, the right or privilege gets extinguished."
Having regard to the nature of licence and the
obligations attached to a licence, under the Excise
Act and Rules, it is open to the Licensing Authority
to consider whether a person who applies for a
licence through an Attorney Holder or who
proposes to run the business by executing a power
of Attorney is a bona fide applicant. Having regard
to the decision in Mahabala, it is open to the
Licensing Authority to consider at the time of grant
of licence as to whether the application is merely a
camouflage for some on else running the
business.
16. Thus, only if it is established that the
possession, and control of the licenced business
has been transferred to some one else, or that the
licensee has not retained any control over the
licenced business, or where there is a transfer of
licence without permission, the licence will be
liable to be cancelled. On the other hand, if the
licensee continues to have control of the licenced
business, but runs the business through a servant
or an authorised agent, (that is Attorney Holder)
then there is no violation of the terms and
conditions of licence, irrespective of whether the
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licencee lives in the city/place where the business
premises is situated. The question of cancellation
of the licence will not arise, in such a case.
17. Coming to the facts of this case, it is seen that
there is no finding that the licencee (petitioner) has
parted with the possession of the licenced
premises or the control of the business to any one
else, in particular to Raj Kumar, the Power of
Attorney Holder. Nor has the licence been
transferred by the petitioner to any one else. The
Power of Attorney was granted to a family
member, even prior to the date of the licence being
transferred from the name of the petitioner's
mother to the petitioner. The petitioner obtained
transfer of the licence from the name of her mother
to her name by making an application through the
said Power of Attorney holder Raj Kumar. Grant of
a Power of Attorney by a Licencee to a family
member, to manage the affairs or business of the
licensee, cannot be considered as parting with the
possession or transferring the control or
transferring the licence to some one else. The third
respondent has completely overlooked this aspect
of the matter and has misconstrued the
observations of this Court in Mahabala's case.
18. Hence, the petition is allowed, Annexure-H
dated 15.10.1999 passed by the third respondent
is quashed. Consequently, the petitioner will be
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entitled to continue her business. She will also be
entitled to claim appropriate refund of Licence Fee
in regard to the period during which she has even
wrongfully prevented from carrying on the
business by the impugned order. This order will
not, however, come in the way of the Department
taking any action in future, in accordance with law,
if it is found that the petitioner has unauthorisedly
transferred the licence or transferred the
possession and control of the licenced business to
any one else".
As is clear from the aforesaid Judgment, the General
Power of Attorney holder armed with valid and subsisting
power of attorney which empowers her to act on behalf of
the original licensee is entitled to seek renewal as well as
transfer/shifting of the license originally granted in favour of
the licensee. In this context, it is relevant to state that the
general power of attorney does not seek transfer of the
license from the name of her husband to her name. On the
other hand, the limited request is to transfer/shift the
license from the existing premises to a new premises in the
name of her husband/petitioner herein.
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6. Under these circumstances, I am of the
considered opinion that the reasons assigned by the
respondent No.1 in the impugned order being contrary to
Rule 23 of the Karnataka Excise [General Conditions of
License] Rules, 1967 which read as under:
"23. Shifting of shops:- Subject to the
restrictions specified in Rule 5, the Deputy
Commissioner may permit a licensee to shift the
location of his shop from one place to another
within the limits of a Grama Panchayat or within
the Municipal Area or City Municipal Corporation
on payment of a fee equivalent to fifty per cent of
the licence fee charged on the licence in respect of
such shop.
Provided further that subject to Rule 5, in
case of CL-2 and CL-9 licences, the Deputy
Commissioner may permit a licensee to shift the
location of his shop:
(a) within the limits of Municipal
Area/Town Panchayat Area or City Municipal
Corporation;
(b) from category (a), (b), (c) and (d)
area to category (e) area of item 2 and item 9 of
sub-rule (1) of Rule 8 of the Karnataka Excise
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(Sale of Indian and Foreign Liquors) Rules 1968
within the District;
(c) within category (e) area of item 2 and
item 9 of sub-rule (1) of Rule 8 of the Karnataka
Excise (Sale of Indian and Foreign Liquors) Rules
1968 within the District."
and the dictum of this Court in Geetha's case supra,
deserves to be quashed and necessary directions be
issued to the respondent.
7. In the result, the following:
ORDER
[a] The petition is hereby allowed.
[b] The impugned communication dated
13.10.2023 passed by the respondent No.1 at
Annexure-J and the order dated 20.10.2023
passed by the respondent No.2 at Annexure-K
are quashed.
[c] The respondents are directed to take
necessary steps to shift the subject license
from the existing premises to the new
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premises at No.512, Gundlupet,
Chamarajanagar District, to No.237/3, Sagade
Village, Chamarajanagar Taluk and District as
expeditiously as possible within a period of
one month from the date of receipt of a copy of
this order.
Sd/-
JUDGE
AN/-
