[Foreign Liquor Rules, 1953] Whether Mere Addition Or Deletion Of A Director Could Be Said To Be A Reconstitution Of A Board In Terms Of Rule 19(Ii): Supreme Court To Consider

The Supreme Court on Wednesday (November 10) agreed to examine as to whether mere addition or deletion of a director could be said to be a reconstitution of a board in terms of Rule 19(ii) of the Foreign Liquor Rules, 1953.

The bench of Justices SK Kaul and MM Sundresh in the present matter was considering a special leave petition assailing Kerala High Court's order dated September 16, 2021.

The High Court in the impugned order had observed that the resignation of the outgoing Director was without seeking previous permission as envisaged by Section 67 of the Abkari Act and Board was reconstituted by resignation of one of the Directors.

The Top Court while issuing notice also stayed the High Court's interim order of recovery of fine of Rs 3 lakh from the petitioner.

Case Before Single Judge, Kerala High Court

The appellant ("Ann Benny"), one of the Directors of Parays Holiday Hotels Pvt. Ltd.had approached the Single Judge of the High Court seeking issuance of writ for quashing Exhibit 7 as per which the Excise Commissioner had imposed fine of Rs.3 lakhs as per the provisions of Section 67(2) and (3) of the Abkari Act and also levied fee of Rs.1 lakh as per Rule 19(iii) of the Foreign Liquor Rules.

She had also sought for declaring Section 67(2) and (3) of Kerala Abkari Act to the extent of seeking previous permission for reconstitution, alteration, modification of any deed constituting such Board of Directors of the Company on the strength of which licence was granted as ultra vires, unconstitutional and in violation of the provisions of the Companies Act, 1956.

The Single Judge on September 9, 2021 admitted the writ petition for final hearing but has refused to grant stay to the effect and operation of the order at Ext.P7 passed by the Excise Commissioner.

Aggrieved the appellant had approached the Division Bench of High Court

Case Before Division Bench, Kerala High Court

Remarking that reconstitution meant change in the organisational set up of the Company, the bench of Justices A.M. Badar and Murali Purushothaman observed that it found it difficult to acceded to counsel for appellant's submission that the Excise Commissioner had committed an error in imposition of fine and fees as share holding pattern had not changed or the Director in whose name the license stood continued in the Board of Directors.

Observing that,

"Resignation of the outgoing Director is without seeking previous permission as envisaged by Section 67 of the Abkari Act and by resignation of one of the Directors, the Board is reconstituted. Therefore, imposition of fine of Rs.3 lakhs for regularisation of this act at this preliminary stage cannot be said to be contrary to the provisions of Section 67(3) of the Abkari Act. Similarly, Rule 19(iii) of the Foreign Liquor Rules provides for levy of fees of Rs.1 lakh for reconstitution of the Board of Directors of the Company. In fact in the matter of Panamoottil Investments (supra), the Division Bench of this Court has categorically pointed out that the intention behind Rule 19 is to ensure that the licence should not fall into undesirable hands," the bench dismissed the appeals.

Case Title: Ann Benny v State of Kerala and Ors| SLP (Civil) No 17230/2021

Coram: Justices SK Kaul and MM Sundresh

Click Here To Read/Download Supreme Court's Order 

Click Here To Read/Download High Court's Order