Reportable
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 983-990 OF 2003
STATE OF KERALA & ANR. ... APPELLANTS
Vs.
B. SIX HOLIDAY RESORTS (P) LTD. & ETC. ... RESPONDENTS
WITH
CIVIL APPEAL NO. 998/2003
B. SIX HOLIDAY RESORTS (P) LTD. ... APPELLANT
Vs.
STATE OF KERALA & ANR. ... RESPONDENTS
WITH
CIVIL APPEAL NOS. 999-1003/2003
KRISHNA REGENCY & ETC. ... APPELLANTS
Vs.
STATE OF KERALA & ANR. ... RESPONDENTS
O R D E R
R.V. Raveendran, J.
The appeals relate to non-grant of FL-3 Licence under
the Foreign Liquor Rules (`the rules’ for short) framed
under the Akbari Act. The appeals arise from the common
2
judgment dated 16.7.2002 of the Kerala High Court in a
batch of cases wherein the amendment dated 20.2.2002 to
Rule 13(3) of the Rules and consequential rejection of
applications for FL-3 licences were challenged. CA Nos.
983-990 of 2003 are filed by the State and the other
appeals are by the applicants for FL-3 licences.
2. For convenience, we will refer to the facts of the
case of M/s. B.Six Holiday Resorts (P) Ltd. (referred to as
`the applicant’ for short), who is the respondent in C.A.
No. 983 of 2003 and the appellant in C.A. No. 998 of 2003.
3. The applicant constructed a resort hotel at Munnar.
The applicant’s restaurant therein was classified by the
Ministry of Tourism, Government of India, as an approved
restaurant. On 11.12.2000, the applicant made an
application for a FL-3 licence under the Rules. As the said
application was not considered, the applicant approached
the High Court. The High Court, disposed of the writ
petition (O.P.No.824/2001) by order dated 9.1.2001 with a
direction to the excise authorities to consider and dispose
of the application within three weeks. The application was
considered and rejected by order dated 19.5.2001 on the
ground that the Managing Director of the applicant had been
convicted in an excise offence. The said rejection was
3
challenged in O.P. No. 17106/2001 contending that the
person convicted was not the Managing Director when the
application was made. The second writ petition was allowed
on 20.6.2001 with a direction to re-consider the
application and pass a fresh order, taking note of the fact
that the convicted Managing Director was no longer in
office and there was new Managing Director at the time of
the application. The Special Secretary (Taxes), Government
of Kerala, reconsidered the application and by order dated
6.10.2001 rejected the application on following four
grounds: (i) the applicant was not a classified restaurant
as contemplated under Rule 13(3) of the Rules; (ii) the
facilities contemplated under Rule 13(3) were not available
in the applicant’s hotel; (iii) only hotels run by Kerala
Tourism Development Corporation and India Tourism
Development Corporation were entitled to FL-3 licences; and
(iv) the current policy of the government was not to grant
any fresh licences. The applicant filed yet another writ
petition (O.P. No. 31993/2001) challenging the rejection. A
learned Single Judge dismissed it by order dated 6.11.2001.
He held that though the first three grounds of rejection
were not tenable, in view of policy of the Government not
to grant FL-3 licences for the time being, a mandamus could
not be issued to the State Government to grant a licence
4
contrary to its policy. The writ appeal filed by the
applicant was allowed on 14.12.2001. The Division Bench of
the High Court agreed with the learned single Judge that
the first three grounds of rejection were not tenable. In
regard to the fourth ground of rejection, the division
bench felt that the policy put forth, was rather vague and
the Government cannot abdicate its function under the Rules
to consider and grant licences, by alleging some vague
policy. It therefore directed the Excise Commissioner to
decide the applicant’s application for FL-3 licence within
two weeks by a speaking order.
4. Thereafter, the applicant gave a representation dated
19.12.2001. The Excise Commissioner considered it and again
rejected the application on 27.12.2001 on the ground that
the applicant’s hotel was only a restaurant approved by
Ministry of Tourism, Government of India, but it was not a
classified restaurant (two star and above) as required
under Rule 13(3). Feeling aggrieved, the applicant
initiated contempt proceedings. The High Court on being
informed that a new Excise Commissioner had taken charge,
granted an opportunity to the new incumbent to reconsider
the matter and pass a fresh order by 22.2.2002. At that
stage, by notification dated 20.2.2002, the Foreign Liquor
5
Rules were amended by foreign Liquor (Amendment) Rules,
2002, with retrospective effect from 1.7.2001. By the said
amendment, the last proviso under sub-Rule (3) of Rule 13
was substituted by the following proviso:
“Provided that no new licences under this
Rule shall be issued.”
The notification contained the following explanatory note
to indicate the purpose of the amendment:
“Government have decided as its policy not
to grant any new FL-3 Hotel (Restaurant)
Licences and also decided not to renew any
defunct licences of the above category with
effect from 1.7.2001 until further orders.
In order to carry out the above decision,
necessary amendments have to be made in the
relevant rules”
On the same date, i.e. 20.2.2002, the Excise Commissioner
considered the application of the applicant and again
rejected the request for grant of licence in view of
proviso to the amended rule, prohibiting grant of new
licences.
5. The applicant challenged the amendment to the Rule and
the consequential rejection of its application in O.P. No.
7112 of 2002. The said writ petition (along with other writ
petitions and writ appeals involving similar issue) were
6
disposed of by the impugned order dated 16.7.2002. The High
Court considered the following four grounds of challenge:
(a) that the repeated rejection of the application by the
Excise department and the amendment of the Rules by
notification dated 20.2.2002 were unreasonable, arbitrary
and was in bad faith and was, therefore, liable to be
interfered; (b) that the proviso to Rule 13(3) was invalid
as it was violative of the main Rule; (c) that the
amendment to the Rules by notification date 20.2.2002, was
bad as it was made merely get over the judgment of the High
Court directing fresh consideration; and (d) that giving
retrospective effect to the Rules was beyond the rule
making power of the State Government under the Act. The
High Court rejected the ground (a),(b) and (c) and upheld
the validity of the amendment. It however accepted ground
(d) and declared that the retrospective effect given to the
last proviso to Rule 13(3) added by notification dated
20.2.2002 was illegal and unenforceable and that the
amendment would be effective only prospectively from the
date of issue, that is with effect from 20.2.2002. As a
consequence, the court directed the excise authorities to
consider the application dated 19.12.2001 (preceded by
application dated 11.12.2000) submitted by the applicant
(and reiterated on 19.12.2001) on the basis of the rules as
7
were operative as on 19.12.2001. In other words, the High
Court held that the application had to be considered with
reference to the rules as they existed on the date of
application and not on the date of consideration of the
application.
6. The State has challenged the said judgment rendered in
the case of the applicant and other similar matters in the
first batch of appeals (CA Nos. 983 to 990 of 2003). The
State has accepted the finding of the High Court that the
retrospective operation of the rules is bad and that the
amendment should be given effect only prospectively. But it
is aggrieved by the direction that the applications filed
by the applicants for FL-3 licences should be considered on
the basis of the rules as they stood on the date of
application. It is submitted by the State that the Court
ought to have directed the applications for FL-3 licences
to be considered with reference to the rules in force when
the application was considered.
7. The applicant, as also other restaurateurs whose
applications for FL-3 licences made in the years 2000 and
2001 were also rejected, have challenged the decision of
the High Court upholding the validity of the amendment and
8
non-grant of licence in CA No. 998 of 2003 and CA Nos. 999-
1003 of 2003.
8. Two issues arise for consideration on the contentions
urged:
(i) Whether an application for grant of FL-3 Licence
should be considered with reference to the Rules
as they existed when the application was made or
in accordance with the Rules in force on the date
of consideration?
(ii) Whether the amendment to Rule 13(3) of Foreign
Liquor Rules substituting the last proviso is
valid?
Re : Question (i)
9. This question is directly covered by the decision of
this Court in Kuldeep Singh v. Govt. of NCT of Delhi (2006)
5 SCC 702 relating to grant of licences for sale of Indian
made foreign liquor. This Court held:
“It is not in dispute that the State
received a large number of applications. It
was required to process all the
applications. While processing such
applications, inspections of the proposed
sites were to be carried out and the
contents thereof were required to be
verified. For the said purpose, the
applications were required to be strictly
scrutinized. Unless, therefore, an accrued
or vested right had been derived by the
9Appellants, the policy decision could have
been changed. What would be an acquired or
accrued right in the present situation is
the question.
x x x x x x x x
In case of this nature where the State has
the exclusive privilege and the citizen has
no fundamental right to carry on business in
liquor, in our opinion the policy which
would be applicable is the one which is
prevalent on the date of grant and not the
one, on which the application had been
filed. If a policy decision had been taken
on 16.9.2005 not to grant L-52 licence, no
licence could have been granted after the
said date.
10. We may in this context refer to some earlier decision
laying down the principle that applications for licences
have to be considered with reference to the law prevailing
on the date of consideration.
10.1) In State of Tamil Nadu v. Hind Stone & Ors. (1981
(2) SCC 205), this Court considered the validity of
government action in keeping applications pending for long
and then rejecting them by applying a rule subsequently
made. This Court while holding that such action is not open
to challenge observed:
“The submission was that it was not open to
the Government to keep applications for the
grant of leases and applications for renewal
pending for a long time and then to reject
10them on the basis of Rule 8C notwithstanding
the fact that the applications had been made
long prior to the date on which Rule 8C came
into force. While it is true that such
applications should be dealt with within a
reasonable time, it cannot on that account be
said that the right to have an application
disposed of in a reasonable time clothes an
applicant for a lease with a right to have the
application disposed of on the basis of the
rules in force at the time of the making of
the application. No one has a vested right to
the grant or renewal of a lease and none can
claim a vested right to have an application
for the grant or renewal of a lease dealt with
in a particular way, by applying particular
provisions. In the absence of any vested
rights in anyone, an application for a lease
has necessarily to be dealt with according to
the rules in force on the date of the disposal
of the application despite the fact that there
is a long delay since the making of the
application”.
10.2) We may next refer to the decision in Union of
India & Ors. V. Indian Charge Chrome & Anr. (1999) 7 SCC
314 wherein this Court held:
“Mere making of an application for
registration does not confer any vested
right on the applicant. The application has
to be decided in accordance with the law
applicable on the date on which the
authority granting the registration is
called upon to apply its mind to the prayer
for registration.”
11. The applicant contended that it had a vested
right because of the several time-bound orders of the High
Court and those orders were deliberately floated by the
11
Excise authorities. An identical contention was rejected by
this Court while considering the issue with reference to
sanction of a licence under the Building Rules, in Howrah
Municipal Corporation v. Ganges Rope Co.Ltd. (2004 (1) SCC
663). This Court held:
“Neither the provisions of the Act nor general
law creates any vested right, as claimed by the
applicant company for grant of sanction or for
consideration of its application for grant of
sanction, on the then existing Building Rules
as were applicable on the date of application.
Conceding or accepting such a so-called vested
right of seeking sanction on the basis of
unamended Building Rules, as in force on the
date of application for sanction, would
militate against the very scheme of the Act
contained in Chapter XII and the Building Rules
which intend to regulate the building
activities in a local area for general public
interest and convenience. It may be that the
Corporation did not adhere to the time limit
fixed by the court for deciding the pending
applications of the company but we have no
manner of doubt that the Building Rules with
prohibition or restrictions on construction
activities as applicable on the date of grant
or refusal of sanction would govern the subject
matter and not the Building Rules as they
existed on the date of application for
sanction. No discrimination can be made between
a party which had approached the court for
consideration of its application for sanction
and obtained orders for decision of its
application within a specified time and other
applicants whose applications are pending
without any intervention or order of the court.
x x x x x x x x
The context in which the respondent Company
claims a vested right for sanction and which
has been accepted by the Division Bench of the
High Court, is not a right in relation to
12“ownership or possession of any property” for
which the expression “vest” is generally used.
What we can understand from the claim of a
“vested right” set up by the respondent Company
is that on the basis of the Building Rules, as
applicable to their case on the date of making
an application for sanction and the fixed
period allotted by the Court for its
consideration, it had a “legitimate” or
“settled expectation” to obtain the sanction.
In our considered opinion, such “settled
expectation”, if any, did not create any vested
right to obtain sanction. True it is, that the
respondent Company which can have no control
over the manner of processing of application
for sanction by the Corporation cannot be
blamed for delay but during pendency of its
application for sanction, if the State
Government, in exercise of its rule-making
power, amended the Building Rules and imposed
restrictions on the heights of buildings on
G.T. Road and other wards, such “settled
expectation” has been rendered impossible of
fulfilment due to change in law. The claim
based on the alleged “vested right” or “settled
expectation” cannot be set up against statutory
provisions which were brought into force by the
State Government by amending the Building
Rules………………………………”
12. Where the Rule require grant of a licence subject to
fulfillment of certain eligibility criteria either to
safeguard public interest or to maintain efficiency in
administration, it follows that the application for licence
would require consideration and examination as to whether
the eligibility conditions have been fulfilled or whether
grant of further licences is in public interest. Where the
applicant for licence does not have a vested interest for
grant of licence and where grant of licence depends on
13
various factors or eligibility criteria and public
interest, the consideration should be with reference to the
law applicable on the date when the authority considers
applications for grant of licences and not with reference
to the date of application.
13. The applicant submitted that it had originally filed
an application on 11.12.2000 and in pursuance of the
decision of the High Court on 14.12.2001, it submitted an
application on 19.12.2001 and that application was
considered and disposed of on 27.12.2001. The applicant
contended that even if the principle laid down in Kuldeep
Singh was applied, the application having been considered
and disposed of by the concerned authority on 27.12.2001,
the law in force on that day ought to have been applied.
The applicant further contended that the amendment to the
rules which came into effect only on 20.2.2002, was not
applicable on 27.12.2001 and therefore the rejection on
27.12.2001 was bad and consequently the impugned order of
the High Court may be construed as requiring the authority
to decide the matter as on 27.12.2001. We find that the
said contention does not have any merit. It is true that
the application was given on 19.12.2001. It is true that
the application was considered and rejected on 27.12.2001
14
on a ground which may not be sound. It is also true that
the amendment to the rules which was introduced by
notification dated 20.2.2002 was not in force or effect on
27.12.2001. But the said order dated 27.12.2001 was neither
challenged nor set aside by the High Court. The applicant
chose to file a contempt application alleging that the
excise authorities had disobeyed the order dated
14.12.2001. In the contempt case, the High Court made an
order on 12.2.2002 that the new Excise Commissioner should
pass an order on the application. Therefore the only
question is whether the order passed by the Excise
Commissioner on 20.2.2002 was in accordance with the Rules
as they stood on 20.2.2002. Under the amended rules, no new
FL-3 licence could be issued. Consequently, the rejection
of the application by order dated 20.2.2002 was in
accordance with the rules and cannot be faulted.
14. Learned counsel appearing for the applicant next
contended that the decision in Kuldeep Singh was not with
reference to any statutory rules, but with reference to a
policy of the executive and therefore inapplicable. We find
no force in this argument. It is true that in that case
there were no statutory rules and what was considered was
with reference to a policy. But the ratio of the decision
is that where licence sought related to the business of
15
liquor, as the State has exclusive privilege and its
citizens had no fundamental right to carry on business in
liquor, there was no vested right in any applicant to claim
a FL-3 licence and all applications should be considered
with reference to the law prevailing as on the date of
consideration and not with reference to the date of
application. Whether the issue relates to amendment to
Rules or change in policy, there will be no difference in
principle. Further the legal position is no different even
where the matter is governed by statutory rules, is evident
from the decisions in Hind Stone (supra) and Howrah
Municipal Corporation (supra).
15. Having regard to the fact that the State has exclusive
privilege of manufacture and sale of liquor, and no citizen
has a fundamental right to carry on trade or business in
liquor, the applicant did not have a vested right to get a
licence. Where there is no vested right, the application
for licence requires verification, inspection and
processing. In such circumstances it has to be held that
the consideration of application of FL-3 licence should be
only with reference to the rules/law prevailing or in force
on the date of consideration of the application by the
excise authorities, with reference to the law and not as on
the date of application. Consequently the direction by the
16
High Court that the application for licence should be
considered with reference to the Rules as they existed on
the date of application cannot be sustained.
Re: Question (ii)
16. The applicants for licence submitted that Rule 13(3)
contemplates FL-3 licences being granted on fulfillment of
the conditions stipulated therein; and the newly added
proviso, by barring grant of new licence had the effect of
nullifying the main provision itself. It was contended that
the proviso to Rule 13(3) added by way of amendment on
20.2.2002 was null and void as it went beyond the main
provision in Rule 13(3) and nullified the main provision
contained in Rule 13(3).
17. Rule 13(3) provides for grant of licences to sell
foreign liquor in Hotels (Restaurants). It contemplates the
Excise Commissioner issuing licences under the orders of
the State Government in the interest of promotion of
tourism in the State, to hotels and restaurants conforming
to standards specified therein. It also provides for the
renewal of such licences. The substitution of the last
proviso to Rule 13(3) by the notification dated 20.2.2002
provided that no new licences under the said Rule shall be
17
issued. The proviso does not nullify the licences already
granted. Nor does it interfere with renewal of the existing
licences. It only prohibits grant of further licences. The
issue of such licences was to promote tourism in the State.
The promotion of tourism should be balanced with the
general public interest. If on account of the fact that
sufficient licences had already been granted or in public
interest, the State takes a policy decision not to grant
further licences, it cannot be said to defeat the Rules. It
merely gives effect to the policy of the State not to grant
fresh licences until further orders. This is evident from
the explanatory note to the amendment dated 20.2.2002. The
introduction of the proviso enabled the State to assess the
situation and reframe the excise policy. It was submitted
on behalf of the State Government that Rule 13(3) was again
amended with effect from 1.4.2002 to implement a new
policy. By the said amendment, the minimum eligibility for
licence was increased from Two-star categorization to
Three-Star categorization and the ban on issue of fresh
licences was removed by deleting the proviso which was
inserted by the amendment dated 20.2.2002. It was contended
that the amendments merely implemented the policies of the
government from time to time. There is considerable force
in the contention of the State. If the State on a
18
periodical re-assessment of policy changed the policy, it
may amend the Rules by adding, modifying or omitting any
rule, to give effect to the policy. If the policy is not
open to challenge, the amendments to implement the policy
are also not open to challenge. When the amendment was made
on 20.2.2002, the object of the newly added proviso was to
stop the grant of fresh licences until a policy was
finalized. A proviso may either qualify or except certain
provisions from the main provision; or it can change the
very concept of the intendment of the main provision by
incorporating certain mandatory conditions to be fulfilled;
or it can temporarily suspend the operation of the main
provision. Ultimately the proviso has to be construed upon
its terms. Merely because it suspends or stops further
operation of the main provision, the proviso does not
become invalid. The challenge to the validity of the
proviso is therefore rejected.
18. In view of the above, the appeals filed by the State
are allowed in part and the appeals filed by the applicants
for licences are dismissed, subject to the following
clarifications:
(i) If any licences have been granted or regularized
in the case of any of the applicants during the
19
pendency of this litigation, on the basis of any
further amendments to the Rules, the same will
not be affected by this decision;
(ii) If any licence has been granted in pursuance of
any interim order, the licence shall continue
till the expiry of the current excise year for
which the licence has been granted.
(iii) This decision will not come in the way of any
fresh application being made in accordance with
law or consideration thereof by the State
Government.
______________________J.
(R. V. RAVEENDRAN)
_____________________J.
(SURINDER SINGH NIJJAR)
New Delhi;
January 13, 2010.