IN THE HIGH COURT OF KERALA AT ERNAKULAM
OP.No. 19927 of 1999(V)
1. ANANTHAPURI CHEMICALS
... Petitioner
Vs
1. STATE OF KERALA
... Respondent
For Petitioner :SRI.A.M. SHAFEEQUE
For Respondent :GOVERNMENT PLEADER
The Hon'ble MR. Justice S.SIRI JAGAN
Dated :20/03/2009
O R D E R
S.SIRI JAGAN, J.
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O.P.No. 19927 of 1999
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Dated this the 20th day of March, 2009
J U D G M E N T
The 1st petitioner is a company who wanted to start a factory for
manufacture of ethyl acetate. The 2nd petitioner is a share holder of
the 1st petitioner company. The 1st petitioner claims to have obtained
appropriate permission from the Government of India as evidenced by
Ext.P1 for starting the industry and registered themselves as an SSI
unit as evidenced by Ext.P3. One of the raw-materials for manufacture
of ethyl acetate is ethyl alcohol. Therefore, necessarily, the company
would have to store ethyl alcohol in the premises of the factory. Ethyl
alcohol cannot be stored without a licence issued by the Kerala
Government under the Kerala Rectified Spirit Rules, 1972. Therefore,
the 1st petitioner filed Ext.P5 application for licence under the Rules.
The same was rejected by Ext.P6. The 1st petitioner filed an appeal,
which was also rejected by Ext.P9. The 1st petitioner approached the
Chief Minister, which also did not bear any fruit. The 1st petitioner
approached the Central Government who directed the petitioners to
seek other remedies. It is under the above circumstances, the
petitioners have filed this original petition seeking the following reliefs:
“i) to declare that Rule 15 of the Rectified Spirit Rules in so far as it
provides that any person or Institution desirous of possessing and
using for a bonafide industrial purpose duty paid rectified spirit,
shall take out a licence in Form R.S.1 as unconstitutional and void.
ii) to issue a writ of certiorari or any other appropriate writ, order or
o.p.19927/99 2
direction calling for the records leading to Exts.P6, P9 and P11 and
quash the same;
iii) Alternatively to issue a writ of mandamus or any other appropriate
writ, order or direction, directing the respondents to grant licence
and permit the 1st Petitioner to possess and use duty paid rectified
spirit for industrial purpose of manufacturing Ethyl Acetate and
Thinners in the 1st Petitioner’s Factory;
iv) to stay the operation of Rule 15(1) of the Rectified Spirit Rules in
so far as it provides for licence for possessing and using rectified
spirit for industrial purposes, pending disposal of the Original
Petition.”
2. The petitioners point out that in Ext.P6, which is the order
issued by the Secretary (Excise), Board of Revenue, no reason
whatsoever is stated for rejecting the 1st petitioner’ application for
licence. That itself is violative of the principles of natural justice. The
petitioners submit that the Government has in Ext.P9 appellate order
stated two reasons. First is that there is possibility of privilege being
misused by the petitioners, as there is good demand for ethyl alcohol
in Kerala and the second is that the 1st petitioner is not financially
sound to run a large scale company. According to the petitioners, both
of the grounds are totally unsustainable. They further submit that
Ext.P9 order has been passed relying upon two letters from the
Secretary, Board of Revenue, copies of which have not been made
available to the petitioners, which also amounts to violation principles
of natural justice. The petitioners further submit that when
respondents enter a finding that there is possibility of the privilege
being misused, the same can only be based on some material on
o.p.19927/99 3
record. If there is any such material, the same has not been disclosed
to the petitioner. Further, no reason is being mentioned as to why the
petitioners are not financially sound. The petitioners point out that as
stated in Ext.P7 appeal memorandum, the factory is situated in 3.72
acres of land, in which plant and machinery worth lakhs of rupees have
been installed, which belong to the company and as such, the finding is
totally without any basis whatsoever. The petitioners, therefore,
submit that the impugned orders are violative of principles of nature
justice and that even otherwise the reasons stated are not supported
by any material on record. The petitioners also submit that the
petitioners understand that the application of the 1st petitioner has
been recommended by all lower authorities, who inspected the
petitioners’ factory after satisfying themselves as to the eligibility of
the 1st petitioner for a licence.
3. The learned Government Pleader, with the help of a
counter affidavit filed in this case, supports the impugned orders. It is
submitted by the learned Government Pleader that in Kerala,
consumption of liquor is increasing every year and as a result, there is
tremendous demand for supply of ethyl alcohol and, therefore, the
finding that there is possibility of misuse of the privilege, if granted to
the 1st petitioner by diverting the alcohol for human consumption, is
supported by adequate material. It is further submitted that going by
o.p.19927/99 4
the memorandum of association of the company, authorised share
capital of the company is only Rs.10 lakhs and therefore, it is clear
that the company is not financially sound. It is also pointed out that
subsequent inspection of the premises of the petitioners revealed that
the premises are being used for manufacturing items required for bar
hotels and therefore, it is celar that if privilege is granted to the
petitioners, there is likelihood of the petitioners misusing the same for
such bar hotels, with whom the petitioners have connections.
4. I have considered rival contentions in detail.
5. Ext.P6 is the order of the Secretary (Excise) rejecting the
application for licence submitted by the 1st petitioner, which reads
thus:
“The application presented by you under rule 15 of the Rectified
Spirit Rules for licence for possession and use of rectified spirit has been
examined by the Board in detail. As the request is not in conformity with
the Rules, the same is rejected under rule 18(2) of the Rules.”
It does not need elaborate discussion to hold that this order is violative
of all principles of natural justice. It contains absolutely no reason
whatsoever for rejecting the application except referring to Rule 18(2)
of the Rules. When Rule 18(2) is quoted, the licensing authority had a
duty to state as to why the 1st petitioner is disqualified for licence
under Section 18(2), which is conspicuously absent in Ext.P6. Ext.P9 is
also violative of the principles of natural justice, since the same has
been passed relying on two letters issued by the Secretary, Taxes,
o.p.19927/99 5
received by the Government subsequent to issue of Ext.P6 order. The
respondents have no case that copies of those letters were made
available to the petitioners before relying on the same to dismiss the
appeal filed by the 1st petitioner. Two reasons are mentioned in
Ext.P9, which are contained in paragraph 2, which read thus:
“2. In his letter read as second paper above the Secretary, Board of
Revenue has reported that the request of M/s.Ananthapuri Chemicals and
Exports (P) Ltd. was rejected under sub rule (2) of Rule 18 of the
Rectified Spirit Rules, 1972 on the findings that there is possibility of the
privilege being misused by them as there is good demand for Ethyl
Alcohol in Kerala and also the applicant is not financially sound to run a
large scale company.”
There is absolutely no mention whatsoever in Ext.P9 as to on what
basis the Government have come to the conclusion that there is
possibility of the privilege being misused by the petitioners. It is also
not stated in Ext.P9 as to why the petitioners are not financially sound
to run a large scale company. Therefore, the reasons mentioned in
Ext.P9 are also not supported by any material whatsoever on record.
Rule 18(2) certainly authorises the licensing authority to reject the
application for licence, if the authority considers that there is likelihood
of the privilege being misused and the applicant is not capable of
discharging their responsibility in respect of the licence. But the
conclusion arrived at based on the same, shall be certainly supported
by adequate material on record, which shall be put to the applicant. In
this case, no material whatsoever is forthcoming in support of the
o.p.19927/99 6
conclusion arrived at. If there are such materials, the same have not
been put to the petitioners. That being so, I have no doubt in my mind
that the impugned orders are totally violative of the principles of
natural justice and non-application of mind. Accordingly, the impugned
orders are quashed. The 2nd respondent is directed to reconsider the
application for licence submitted by the 1st petitioner in accordance
with the materials available such as, report of the Assistant Excise
Commissioner referred to in Rule 16 of the Rules, after affording an
opportunity of being heard to the 1st petitioner. If there are any
materials, on the basis of which, the respondents propose to reject
the application, those materials shall be put to the petitioners with an
opportunity to controvert or explain the same. Orders to be passed
shall contain valid reasons and the same shall discuss the materials
based on which conclusions are to be arrived at. Fresh orders as
directed above shall be passed after affording an opportunity of being
heard to the petitioners, as expeditiously as possible, at any rate,
within two months from the date of receipt of a certified copy of this
judgment.
The original petition is disposed of as above.
Sd/-
sdk+ S.SIRI JAGAN, JUDGE
///True copy///
P.A. to Judge
S.SIRI JAGAN, J.
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O.P.No. 19927 of 1999-V
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J U D G M E N T
20th March, 2009