M/S. Kumar Enterprises vs The Commissioner Of Excise
2026 Latest Caselaw 1459 Kant

licences would be considered only once the disputes were settled.

However, before the issuance of this endorsement, the appellant

had lodged a writ petition in WP.No.13507/2020 inter alia, praying

that the Commissioner and Deputy Commissioner be directed to

immediately effect the transfer of the licences, pursuant to the

application dated 14.08.2020. Therefore, when the endorsement

dated 05.12.2020 was issued, the said writ petition was still

pending. As noted earlier, that petition was disposed of by an

order dated 18.12.2020, after hearing the parties involved. The

licensee was not a party to that petition.

28. We consider it relevant to refer to the following extract of the

said order dated 18.12.2020:

3. Having heard the learned counsel for the parties and having perused the petition papers, this Court is inclined to grant indulgence in the matter for the following reasons:

a) prima facie, the application for transfer of the CL Licence is entitled to be considered on merits, as rightly contended by the counsel for the petitioner; relevant part of Sub-Rule (1) of Rule 17B of 1967 Rules reads as under;

** ** **

b) the above provision has been interpreted by a Coordinate Bench of this Court in W.P.No.17393/2012 between Sri S.A.SURESH VS. THE DEPUTY COMMISSIONER disposed off on 19.07.2012 holding that pursuant to amendment of law w.e.f. 01.04.1995, the licences of the kind which were otherwise not

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transferable earlier have been made transferable; the requirement for such a transfer is : (i) there should be an application by the licencee seeking transfer of his licence,

(ii) the payment of transfer fee equivalent to the annual licence fee, (iii) the named transferee should be eligible for the grant of a licence under the Karnataka Excise Act, 1965 and the Rules made thereunder & (iv) the approval of the Excise Commissioner; there is force in the contention of the petitioner that the requirement of law is complied with going by the documents produced on record, more particularly the applications in the prescribed form supported by the Certificate of Attestation of signatures of the Licencee by the jurisdictional officers & Consent Deed drawn on Rs.50 non-judicial stamp paper; and,

c) learned AGA on instructions from Mr.Hidayath Khaleel, the Excise Inspector present in the Court submits that there will be no difficulty for considering the subject applications in terms of Rule 17B, if a reasonable period is prescribed for the same by this Court.

In the above circumstances, this writ petition succeeds; a Writ of Mandamus issues to the second respondent to consider and to the first respondent to cause to be considered subject applications/request for licence within a period of two weeks from the date a copy of this judgment is produced and to inform the petitioner of the result of such consideration.

The delay in consideration shall entail the second respondent a cost of Rs.5,000/- per week personally payable to the petitioner."

29. In view of the said order, the endorsement dated 05.12.2020

could not impede the Excise authorities from examining the

application for transfer of the licences.

30. In compliance with this court's order dated 18.12.2020, the

Commissioner considered the application for transfer of licenses

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and granted its approval by an order dated 08.01.2021. Following

the said approval, the Deputy Commissioner passed an order

dated 11.01.2021.

31. These orders were questioned by the licensee in writ

petition being WP.No.2756/2021. As noted above, this petition was

allowed in part by an order dated 21.06.2021. The impugned

orders dated 08.01.2021 and 11.01.2021, passed by the

Commissioner and the Deputy Commissioner, respectively, were

set aside. The licensee was directed to submit his explanation in

support of the withdrawal of his application dated 04.08.2020. The

appellants were also permitted to furnish statements along with any

documents, and the competent authority was directed to pass a

detailed speaking order after due consideration of the rival pleas. It

was further directed that status quo would be maintained till the

final decision was taken. The operative part of the said order is as

under:

"1) Impugned orders dated 11.01.2021 bearing No.EXE/BUD-5/VALAYA-31/IML/15/2020-21 passed by respondent No.2-The Deputy Commissioner (Excise) vide Annexure-A and dated 08.01.2021 bearing No.Excise/11014/156/2020 issued by respondent No.1-

The Commissioner of Excise vide Annexure-A1 are set aside.

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2) The petitioner is hereby directed to submit his explanation in support of withdrawal of application dated 14.08.2020. Respondent No.3 is also permitted to furnish necessary statement along with documents, if any. They are directed to exchange their statements along with documents, if any.

3) The competent authority is hereby directed to pass a detailed speaking order after due consideration of each of the plea of the petitioner and respondent No.3 and communicate the same to the respective parties within a period of three months from the date of receipt of this order.

4) Till final decision is taken, parties are hereby directed to maintain status quo.

5) Respondent No.3 is at liberty to challenge the order dated 05.12.2020 by which petitioner's application dated 14.08.2020 to transfer CL-9 and RVB licenses is rejected."

32. It is important to note that the endorsement dated

05.12.2020 was brought to the court's notice in Writ Petition

No.2756/2021 and was one of the grounds for challenge. It is also

necessary to bear in mind that the aforesaid endorsement was of

no relevance in view of the court's order dated 18.12.2020 in Writ

Petition No.13507/2020 (EXCISE). However, the order dated

18.12.2020 was passed without hearing the licensee and without

the parties bringing the endorsement dated 05.12.2020 to the

court's attention. In this context, the court in Writ Petition

No.2756/2021 directed the competent authority to issue a detailed

speaking order after considering the opposing arguments. Clearly,

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the said order concerned the application for the transfer of licences.

A plain reading of these directions clearly contradicts the argument

that the application for transfer of licences did not survive by virtue

of the endorsement dated 05.12.2020. The orders issued by the

learned Single Judge of this Court in WP.No.13507/2020 and

WP.No.2756/2021 explicitly state that the Commissioner and

Deputy Commissioner were required to consider the application for

transfer of licences. The import of licensee's claim that the

application for transfer of licences is accepted would make the

subsequent directions issued by the court unnecessary.

33. The licensee's contention that the appellant was merely

granted the liberty to challenge the order dated 05.12.2020,

whereby the application for transfer of the licences was rejected,

rests on direction no. (5) issued by the learned Single Judge as

noted above in the order dated 21.06.2021. However, the said

directions are to be read in conjunction with the other directions

issued by the court. Thus, the expression 'liberty to challenge' the

order dated 05.12.2020 has to be construed as liberty to advance

contentions to assail the said view - namely, that the application for

transfer can be considered after the parties settle their disputes -

before the Excise officials. The said direction cannot be construed

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to mean that the appellant was granted liberty to file a separate

appeal or a writ petition to challenge the said endorsement. A

meaningful reading of the directions is quite to the contrary to what

is canvassed by the counsel for the licensee. The said directions

issued by the court expressly reserve the liberty to the appellant to

advance submissions - which were required to be considered by

the competent authority - contrary to the order dated 05.12.2020.

In other words, the court merely clarified that the order would not

impede the appellant from advancing its submissions for the

transfer of the licences pursuant to the application dated

14.08.2020. Any other interpretation would militate against the plain

tenor of the orders passed by this Court. If the licensee's

contention that the application dated 14.08.2020 did not survive in

view of the endorsement dated 05.12.2020 is accepted, there was

no occasion for the court to issue elaborate directions for affording

the parties an opportunity to be heard and for the competent

authority to pass a detailed speaking order.

34. The second and main question to be addressed is whether

the licensee had the right to withdraw the application for transfer of

the licences after the same has been accepted by the Excise

authorities.

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35. Rule 17B of the Rules, which concerns the transfer of

licences, is relevant and is set out below.

"RULE 17B

17-B. Transfer of licence in other cases - (1) Notwithstanding anything contained in Rule 2. licences issued.-

(i) for Sale of Indian Liquor (other than arrack) or Foreign Liquor or both, in Form No.CL-1 (Wholesale licence) or CL-2 (retail shop licences) [CL-6A (Star Hotel Licence) or CL-7 (Hotel and Boarding House Licences) or CL-9 (Refreshment room (Bar) Licence under the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968;

or

(ii) for sale of Beer under the Karnataka Excise (Lease of Right of Retail Vend of Beer) Rules, 1976;

The Deputy Commissioner may on an application by the licensee and subject to payment of transfer fee equivalent to twice the annual licence fee specified in Rule 8 of the Karnataka Excise (Sale of Indian and Foreign Liquors) Rules, 1968 or Rule 5 of the Karnataka Excise (Lease of Right of Retail Vend of Beer, Rules, 1976, as the case may be, and 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 under the Karnataka Excise Act, 1965 or the rules made thereunder:

(2) Nothing in this rule shall apply to transfer of licence under Rule 17-A.

36. A plain reading of the aforesaid Rule indicates that the

Deputy Commissioner may transfer the licences on an application

being filed by the licensee. However, the said transfer would be

subject to the satisfaction of the following conditions:

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"a) the transfer fee as specified in Rule 8 of the Karnataka Excise (Sale of Indian and Foreign Liquor) Rules, 1968 or Rule 5 of the Karnataka Excise (Lease of Right of Retail Vend of Beer) Rules, 1976 is paid;

b) the Excise Commissioner has approved the transfer;

and

c) The transferee is a person who is otherwise eligible for the grant of a license under the Karnataka Excise Act, 1965 and the rules made thereunder."

37. Plainly, if the aforementioned conditions are satisfied, the

Deputy Commissioner is required to transfer the licence. These

contentions are also noted by the learned Single Judge in the case

of Suresh v. the Deputy Commissioner: WP 17393/2012

(EXCISE), which was also noted by the learned Single Judge in

the order dated 18.12.2020 in WP.No.13507/2020 (EXCISE).

38. There is no dispute that an application for transfer of a

licence had been made. Thus, clearly, the Deputy Commissioner

had the jurisdiction to transfer the licences under Rule 17B of the

Rules.

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39. It is a well-established position of law that a licence for liquor

is a privilege granted by the State to the licensee. It is well settled

that no person has a fundamental right to carry on the trade in

liquor. Trading in liquor is res extra commercium (outside

commerce) as held by the Constitution Bench of the Supreme

Court in Khoday Distilleries Ltd. v. State of Karnataka1. This

principle was reiterated by the Supreme Court in Uga Sugar

Works Ltd vs Delhi Administration and Ors2; State of T.N vs K.

Vinayagamurthy3; State of Punjab vs Devans Modern

Breweries Ltd.4; State of Bihar vs Nirmal Kumar Gupta5; State

of Kerala vs Kandath Distilleries6 and State of Tamil Nadu vs

K. Balu and Anr.7 It is is necessary to bear in mind the aforesaid

principle while considering the orders passed by the Excise

Authorities to transfer the licences. Thus, the question has to be

viewed from the perspective of whether the Deputy Commissioner

had the jurisdiction to transfer the licences in accordance with the

Rules.

(1995) 1 SCC 574

(2001) 3 SCC 635

(2002) 7 SCC 104

(2004) 11 SCC 26

(2013) 2 SCC 565

(2013) 6 SCC 573

(2017) 2 SCC 281

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40. Concededly, there is no provision for withdrawing an

application once it is filed. It is also necessary to bear in mind that

the orders, which are impugned in the writ petition, were passed by

the Commissioner and Deputy Commissioner in exercise of their

statutory power. It is well settled that no interference with such

orders is permissible under Article 226 of the Constitution of India,

unless this Court finds that the decision is (i) rendered by a person

lacking the competence or authority to pass such orders; (ii)

contrary to the statutory provisions; or (iii) offends any legal or

constitutional right of person(s).

41. We may now examine the order dated 07.12.2021. The

Deputy Commissioner had at the outset noted as under:

1. Sri H.S. Krishnamurthy, residing at No. 88, Survey No. 97, Inorbit Mall, 2nd Floor, EPIP Area, Hoodi Village, K.R. Puram Hobli, Bengaluru East Taluk, Bengaluru, has submitted a petition as per Reference (1) seeking transfer of the CL-9 certificate along with the corresponding RVB licence standing in his name for the year 2020-21, to the names of the partners of M/s Kumar Enterprises, namely Sri Bharat S. Kumar and Sri Rohit S. Kumar. In this connection, the aforesaid partners were personally present before me in this office on 31-08-

2020, and in my presence, mutually consented and signed the request for transfer of the licence under Rule 17(B). Videography of this proceeding has been carried out.

42. We may also consider the stage at which the licensee

attempted to withdraw the application. The Deputy Commissioner

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observed that, upon reviewing the said applications, the relevant

Excise Inspector and the Deputy Superintendent of Excise (Sub-

Division-10) were called to furnish a detailed report, which they

submitted on 31.08.2020. Subsequently, the proposal dated

31.08.2020 was forwarded to the Commissioner for prior approval.

At that stage, the licensee submitted a complaint dated 28.08.2020

seeking to withdraw the application, which the Office of the Deputy

Commissioner received on 01.09.2020. The Deputy Commissioner

noted that the transfer process had already begun and the required

fees had been paid. He held that once the licence transfer process

under Rule 17B of the Rules has started, the procedure must follow

the prescribed course. Once a licence holder has paid the

prescribed fee and submitted a transfer application, the certificate

holder may not revoke or retract the application. The Deputy

Commissioner recorded that the parties had appeared before him

and had made a request for the transfer of the licence, which was

also videographed. The Deputy Commissioner concluded that any

dispute between them regarding the payment of consideration falls

outside the statutory framework and does not justify halting the

proceedings. He further noted that Rule 17B only refers to the term

'transfer' and does not include the word 'sale'. There is no provision

for a licence holder to sell licences.

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43. As noted above, the licensee appealed the decision before

the Commissioner, which was ultimately rejected by a detailed

order dated 21.03.2024. The Commissioner stated that once an

application under Section 17B is submitted, it cannot be withdrawn

unless a transferee is disqualified. It was also noted that the

licensee had paid the licence transfer fee, prompting and initiating

the transfer process in accordance with the law. The Commissioner

held that the Department cannot interfere in disputes that arise

after the transfer and thus must accept the validity of the

application once both parties appear and affix their signatures. The

Commissioner observed that the parties had, on multiple

occasions, requested time to settle their disputes concerning

financial transactions outside of court. It was further noted that the

licensee had no objection to the transfer of the licences to the

appellant, provided their financial disputes are resolved, which the

Commissioner recognised as being beyond the scope of the Excise

Department.

44. We find no infirmity in the said decision that would warrant

interference by this Court.

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45. As noted, at the outset, there is no inherent right of the

licensee to apply for transfer and withdraw such an application at

will.

46. The licence is a privilege granted by the State, and the State

can withdraw or transfer it, subject to the statutory framework.

There is no provision in the statute which contemplates a licence

as a saleable commodity. Thus, once the application is filed with

the requisite fees and the transfer process is triggered, the

authorities must act in accordance with the statutory framework.

Thus once the transfer is initiated upon filing of the requisite

application for transfer, the licensee can no longer control the

process.

47. We are unable to accept that the impugned orders passed

by the Deputy Commissioner and the Commissioner fall foul of

Rule 17B of the Rules. The said orders also do not violate any legal

or constitutional right of the licensee. In view of the above, there is

no scope for interference with the impugned orders in exercise of

powers under Article 226 of the Constitution of India.

48. The learned Single Judge had proceeded on the basis that a

person who files an application would also be vested with the right

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to withdraw the same. We are unable to concur with this view,

given the nature of the right of a licence holder and the statutory

framework.

49. We are unable to accept that a licence holder can control

the transfer of a licence once an application has been filed and the

Deputy Commissioner is in seisin of the same under Rule 17B of

the Rules. The learned Single Judge had also proceeded on the

basis that the appellant was not entitled to pursue its claim under

the application without establishing that the application was

irrevocable on account of the consideration paid, in whole or in

part. Additionally, the learned Single Judge had observed that the

memorandum of understanding between the licensee and the

appellant is only an agreement to enter into an agreement and thus

would not be enforceable.

50. The question of whether the application filed by the licensee

is revocable or irrevocable is not contingent on whether he has

received consideration for it. The dispute or controversy regarding

the agreement between the licensee and the appellant is clearly

outside the scope of the Rules. As rightly held by the Deputy

Commissioner as well as the Commissioner, the Excise

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Department cannot be drawn into any such dispute. Thus, the right

of any licensee to withdraw his application for transfer of a licence

is required to be examined solely with reference to the statutory

framework and not in the context of a private agreement between

the licensee and the appellant.

51. In view of the above, the present appeal is allowed and the

impugned order is set aside.

Sd/-

(VIBHU BAKHRU) CHIEF JUSTICE

Sd/-

(C.M. POONACHA) JUDGE

SD