State Cannot Exceed Governing Statute And Rules To Refuse Renewal Of Excise License: Calcutta High Court

Justice Moushumi Bhattacharya while hearing a writ petition observed:

“The State cannot add to the legislative object or curtail the right of an entity where the Act and the Rules do not provide the basis for such curtailment. The State is also under an obligation to preserve the equality and fairness mandate in the Constitution and is hence precluded from applying different standards to different entities on the pretext of ensuring a crime-free environment in the establishments where liquor is sold and consumed.”

The case circumscribes around the renewal of excise licenses of three restaurant-cum-bars which enjoyed excise license from 2001 onwards. The petitioner applied for renewal in March 2017.

The renewal of said licenses were rejected by three orders of the respondents on grounds that there is commission of offences under the Indian Penal Code and The Immoral Traffic (Prevention) Act, 1956 in the concerned restaurants and pendency of cases against Jagjit Singh who being involved with the affairs of the three establishments.

The counsel appearing for petitioners argued that the pendency of judicial proceedings or Police Reports cannot form the basis of a rejection of an application for renewal of Excise License. Counsel relied on the provisions of the Bengal Excise Act, 1909 and the West Bengal Excise (Selection of New Sites and Grant of License for Retail Sale of Liquor and Certain Other Intoxicants) Rules, 2003 for this purpose. Counsel submitted that the State cannot give preferential treatment to those on a similar footing to that of the petitioners.

The government counsel contended that there are immoral activities being carried on in the three restaurants of the petitioners and submits that this is a fit case for refusing renewal of license as there is a question of law and order. The counsel further argued that the Court to lift the corporate veil of the three establishments to ascertain the involvement of Jagjit Singh in the day to day affairs of the restaurants.

Court’s Decision

While allowing the writ petition the court held that the non-renewal of license must only be for the conditions/circumstances provided under the Act and the Rules.

On the issue of lifting the corporate veil, the court observed:

“The concept of lifting of the corporate veil, as stated in Palmer’s Company Law and Gower’s Modern Company Law, is where the corporate character of a company of having a separate and distinct legal entity from that of its shareholders, is being used for the purpose of committing a fraud or illegality...The need to pierce the corporate veil of the petitioner no. 1 Company may not be necessary in light of the specific findings of the impugned order of the Addl. Chief Secretary that Jagjit Singh made various applications on behalf of the petitioner no. 1 before the Excise Authorities. There is also no case made out with reference to commission of fraudulent activities by the petitioner no. 1 Company.”

The court further ruled:

“There is little doubt that the grant of a liquor license is a privilege as opposed to a right; the authority conferred with the power of grant or refuse a liquor license must however act within the equality mandate of the Constitution of India. If one entity has been deprived of a license on the ground of violation of the Act or the Rules, other entities must be visited with the same consequences subject to existence of similar facts in both the cases. The public interest argument and the supremacy of public consideration over private rights is of course the guiding light but cannot be used to defeat the express provisions in the governing Act and the Rules. The State can only rely on an express and existing provision in an Act to deprive a person or citizen of his/her valuable legal rights.”

In conclusion the court quashed the impugned orders and directed the respondents to revisit the applications for renewal of licenses of the petitioners for the three establishments and pass reasoned orders within 4 weeks in accordance with the 1909 Act, the 2003 Rules.

Case Title: M/s. Down Town Temptation Private Limited and Another v. Additional General Secretary, Finance Department, Government of W.B. and Others.

Coram: Justice Moushumi Bhattacharya

Judgment Date: 19.01.2023

Citation: 2023 LiveLaw (Cal) 12 

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