Supreme Court of India
THE KERALA BAR HOTELS ASSOCIATION &ANR.versusSTATE OF KERALA & ORS.
- Citation
- 2015 INSC 949
- Decided
- 29 December 2015
- Disposal
- Dismissed
- Bench
- VIKRAMAJIT SEN
Holding
The Supreme Court held that the Kerala government's policy of limiting foreign liquor licences to five‑star hotels is a reasonable classification aimed at curbing public alcohol consumption and is constitutionally valid under Articles 14, 19 and 47.
Summary
The Kerala Bar Hotels Association and other hotel operators challenged the Kerala government's 2014‑15 policy that restricted foreign liquor (FL‑3) licences to only five‑star hotels, alleging violations of Articles 14, 19 and 47 of the Constitution. The State argued that the policy is a reasonable classification aimed at curbing public consumption of alcohol and promoting tourism, and that the classification is based on star‑rating, a standard set by the Ministry of Tourism, not the State. The Court examined the validity of the classification under the test of reasonable differentia and nexus to the policy objective, and considered the State's exclusive control over liquor manufacture and distribution under the Abkari Act. It held that the policy is a permissible exercise of the State’s power, not arbitrary or irrational, and does not infringe the constitutional rights claimed. Consequently, the appeals by the hotels were dismissed and the State’s appeal was allowed, upholding the policy.
Issues considered
- Whether the exclusion of all hotels except five‑star hotels from FL‑3 liquor licences violates Article 14’s guarantee of equality.
- Whether the restriction infringes the right to trade in liquor under Article 19(1)(g) subject to Article 19(6) and Article 47.
- Whether the policy is arbitrary, unreasonable or procedurally unsound, warranting judicial intervention.
- Whether the State may classify hotels based on star rating for the purpose of reducing public consumption of alcohol and promoting tourism.
- Whether the policy is within the legislative competence of the State under the Abkari Act, 1077 and the Foreign Liquor Rules.
Legislation cited
- Abkari Act, 1077s. 10, s. 15C, s. 24-29
- Foreign Liquor Ruless. Rule 13(3)
Subjects
Article 14Article 19Article 47Abkari ActForeign Liquor Ruleslicensingpublic consumption of alcoholstate policyclassificationfive‑star hotelsliquor prohibitionjudicial review
Judgment
[2015) 11 S.C.R. 256
A THE KERALA BAR HOTELS ASSOCIATION &ANR.
v.
STATE OF KERALA& ORS.
(Civil Appeal No. 4157 of2015)
B
DECEMBER 29, 2015.
[VIKRAMAJIT SEN AND SHIVA KIRTI SINGH, JJ.]
Constitution of India, 1950:
C Art.14 - Exclusion of Five star hotels in the State of
Kera/a from ban to serve alcohol in their bars - Constitutional
validity of - Held: Banning public consumption of alcohol is
a positive step toward bringing down the consumption of
alcohol- There is no illegality or irrationality with the intention
D of the State to clamp down on public consumption of alcohol
- The impugned policy, therefore, cannot be written off as
arbitrary or procedurally unsound - Foreign Liquor Rules
Abkari Act, 1077 - ss. 10 and 24 to 29.
E Art.47- Duty of State to improve public health- Ban
on liquor- Held: Art.47 places responsibility on every State
Government to at least contain if not curtail consumption of
alcohol - Impugned policy permitting only Five star hotels
in the State of Kera/a to serve alcohol in their bars i.e. in
F public, therefore, is to be encouraged and not to be struck
down or discouraged by the courts.
Administrative law:
Judicial review- Intervention with State policy-Held:
G Courts must be loathe to venture into an evaluation of State
policy - It must be given a reasonable time to pan out.
Dismissing the appeals, the Court
HELD: 1. The State's policy to achieve a liquor-
H free Kerala has three constituents. The first is regarding
256
THE KERALA BAR HOTELS ASSOCIATION v. STATE OF 257
KERALA
manufacture. Manufacture is no longer in private hands, A
a_nd no licenses have been given since 1999. There is
only one Government distillery in the State, thus giving
the State the necessary control. Secondly, wholesale and
retail supply has been under the control of the State since
1984. The Government has taken steps to curb B
consumption by reducing the number of FL-1 shops by
over 10 per cent, from 384 to 332, between 2014 and
2015. The third element is regarding consumption which
is in alarming proportion in Kerala especially when
compared to other States. [Para 15] [283-8-D] C
2. It is trite law thatArticle 14 allows for reasonable
classifications, where the classification fulfills the dual
criteria of being based on a reasonable differentia which
has a nexus with the object sought to be achieved. A D
·right under Article 19(1 )(g) to trade in liquor does exist
provided the State permits any person to undertake this
business. It is further qualified by Article 19(6) and Article
47. Article 47 of the Constitution places a responsibility
on every.State Government to at least contain if not E
curtail consumption of alcohol. The impugned Policy,
therefore, is to be encouraged and is certainly not to be
struck down or discouraged by the Courts. How this
policy is to be implemented, modified, adapted or F
restructured is the province of the State Governmentand
not of the Judiciary. The consumption of tobacco as well
as liquor is now undeniably deleterious to the health of
humankind. Advertising either of these intoxicants has
been banned in most parts of the world, the avowed G
purpose being to insulate persons who may not have
partaken of this habit from being seduced to start.
Banning pubic consumption of either of these inebriates
cannot be constrained as not being connected in any
manner with the effort to control consumption of H
258 SUPREME COURT REPORTS [2015] 11 S.C.R.
A tobacco, or with alcohol. Vulnerable persons, either
because of age or proclivity towards intoxication or as a
feature of peer pressure, more often than not, succumb
to this temptation. Banning public consumption of
alcohol, therefore, cannot but be seen as a positive step
B towards bringing down the consumption of alcohol, or
as preparatory to prohibition. [Paras 17, 24, 25] (284-G-
H; 291-A-B, G-H; 292-A-C]
3. To meet the tests of Article 14, i.e. the right to
C equality, there has to be intelligible differentia in the
classification or the categorisation that has been carved
out either by the Legislation or by the State policy has to
be discernable. So far as the State of Kerala is
concerned, steady progression in this regard is
D perceptible inasmuch as it had started by placing a ban
on the consumption of alcohol firstly on un-starred
hotels, followed by Two Star hotels, which re-:eived the
unqualified imprimatur of this Court in B.Six Hotels.
Encouraged and emboldened by this decision, the
E Government thereafter placed a bao on Three Stars
hotels, which was again assailed in Court on the
predication that a ban exempting Four Star, Five Star and
Heritage hotels created a hostile and unfair
F discrimination. There was another element in this
litigation, namely that those who had received licences
were found to possess vested rights towards their
renewal. There was also a challenge to the distance
criteria prescribed by the State. All these grounds of
G assailment did not find favour yet again with the Co-
ordinate Bench in Surendra Das. Even at this stage it
has been clarified on behalf of the State of Kerala that
they intend to prohibit public consumption of alcohol
even in Four Star and Heritage hotels. It is important to
H note the fact that it is not the State which has imposed
THE KERALABAR HOTELS ASSOCIATION v. STATE OF 259
KERALA
the classification of Star gradation of hotels. This is done A
by the Ministry of Tourism, which in turn is further guided
by the criteria established in the hospitality trade ..
Placing a moratorium on all hotels other than Five Star
hotels, therefore, is not a violation of Article 14 of the
Constitution. It is nobody's case that some hotels ought B
to have been granted Five Star grade or that the State
has prohibited anyone from endeavouring to upgrade
their hotels from Four Star to Five Star. The least amount
of sale of alcohol (0.08 per cent) occurs in Five Star
hotels, which sale indubitably includes guest orders in C
room-service. There is no apparent arbitrariness or
capriciousness either in the classification, nay the unique .
treatment given by the State to hotels possessing Five
Star rating. There can be no gainsaying that the prices/
0
tariff of alcohol in Five Star hotels is usually prohibitively
high, which acts as a deterrent to individuals going in
for binge or even casual drinking. There is also little
scope for cavil that the guests in Five Star hotels are of
a·mature age; they do not visit these hotels with the sole E
purpose of consuming alcohol. It is trite that since the
obligation on the State was to consider the Report, not
to incorporate it in its entirety, no legal requirement has
been transgressed. The policy cannot, therefore, be
written off as arbitrary or procedurally unsound. [Para F
26] [292-D-H; 293-A-H; 294-A-D]
4. It is not the State that makes classification of
Star Rating so far as hotels are concerned. · This is
intrinsically modulated by the Tourism Industry and not G
by the State Government. The impugned policy of
eradicating consumption of alcohol in public applies to ·
all stakeholders without exception. However, thereafter
a relaxation or exception, in the interest of tourism, has
been forged in favour of Five Star hotels alone so far as H
260 SUPREME COURT REPORTS [2015) 11 S.C.R.
A the drive against public consumption of liquor is
concerned. In other words, were it not for considerations
of tourism, this exception in favour of Five Star Hotels
may have been struck down. Courts should be chary
from interfering in policy matters, by infusing or imposing
B its assessment of the policy. The Court may well opine
that there is close similarity between Five Star and Four
Star and Heritage Hotels with regard to foreign clientele;
but that segregation or selection is the preserve of the
State Government. This is altogether different from
C viewing the position from the stand point of creating a
classification in favour of Five Star hotels. The State can
draw support from Rule 13(3) which postulates that
special measures for the promotion of tourism can be
ordained by the State. [Para 28] [294-F-H; 295-A-C]
0
5. The Court cannot be blind to the fact that a
social stigma at least as far as the family unit is concerned
still attaches to the consumption of alcohol. Free trade
in alcohol denudes family resources and reserves and
E leaves women and children as its most vulnerable
victims. Purchasing alcohol from a FL-1 shop would
entail consuming it under the reproachful gaze of the
dependants, especially the female members of the family.
F This is certainly a discouragement to regular and
excessive consumption of alcohol. The possibility exists
that rooms may be rented in Three and Four Star hotels,
where alcohol can be brought from FL-1 shops and then
consumed. However, this does not constitute public
G consumption, and therefore is not fatal to the besieged
State's policy. The challenge to this policy in respect of
Three Star hotels and below has been repulsed by this
Court and there is no reason to depart from the path
traversed by this Court in B.Six Hotels and thereafter in
H Surendra Das. [Para 29] [295-F-G; 296-A-B]
THE KERALABAR HOTELSASSOCIATION v. STATE OF 261
KERA LA
6. There has been abundance of litigation on the A
question of the Courts' interference in State policy.
Judicial review is justified only if the policy is arbitrary,
unfair or violative of fundamental rights. Courts must
be loathe to venture into an evaluation of State policy. It
must be given a reasonable time to pan out. If a policy B
proves to be unwise, oppressive or mindless, the
electorate has been quick to make the Government aware
of its folly. There is n·o illegality or irrationality with the
intention of the State to clamp down on public
consumption of alcohol. The One Man Commission C
Report has been considered, so the policy does not
suffer .from the vice of arbitrariness. In these
circumstances, it is not for the Appellants to argue or to
hold that the goal of prohibition would be more likely to
0
be met by reducing the number of FL-1 shops or by
introducing any other measure. [Para 30] [296-C-D, G-H;
297-A]
7. If the sale of beer and wine as a consequence
of grant of FL-11 licenses discloses an increase or ifthere E
is a trend towards serving beer of a higher alcohol
content, the State will have to review its stand, failing
which it would inexorably invite further litigation. This
curial warning also applies to any laxity in policing or F
ensuring that no person below the permissible age is
allowed to consume alcohol in public. Additionally,
thousands of workers at bars that lost their FL-3 licenses
have been rendered unemployed as a result of the
impugned policy, leading to over a dozen suicides. G
[Para 31] [297-H; 298-A-C]
State of Kera/av. B.Six Hotels Resort Private Ltd.
2010 (3) SCR 1 : 2010 (5) sec 186; State of
Kera/a v. Surendra Das 2014 (3) SCALE 421; AIR
H
262 SUPREME COURT REPORTS [2015] 11 S.C.R.
A 2014 SC 2762 : 2014 SCR1054; Census
Commissionerv. R. Krishnamurthy (2015) 2 SCC
796; Ba/co Employees' Union (Regd.) v. Union
of India and Ors. 2001 (5) Suppl. SCR 511: (2002)
2 sec 333- relied on.
B
P. N. Kaushal v. Union of/ndia 1979(1) SCR 122
: 1978 (3) SCC 558; Krishan Kumar Narula v.
State of Jammu and Kashmir AIR 1967 SC 1368
: 1967 SCR 50; Khoday Distilleries Ltd. v. State
c of Kamatka 1994 (4) Suppl. SCR 477 :1995 (1)
SCC 574; In Re: The Special Courts Bi/I, 1978
1979 (2) SCR 476: 1979 (1) sec 380; State of
Maharashtra v. Indian Hotel and Restaurants
Association 2013 (7) SCR 654 : (2013) 8 SCC
D 519; Ashok Kumar Thakurv. Union oflndia (2011)
12 SCC 787; Reliance Airport Developers Pvt.
Ltd. v. Airports Authority of India and Ors. 2006 (8)
Suppl. SCR 398 : (2006) 10 SCC 1 - referred
to.
E
Case Law Reference
2010 (3) SCR 1 relied on. Para 3
2014 SCR 1054 relied on. Para 3
F 1979 (1) SCR 122 referred to. Para 6
1967 SCR 50 referred to. Para 7
1994 (4) Suppl. SCR 477 referred to. Para 8
1979 (2) SCR 476 referred to. Para 9
G
2013 (7) SCR 654 1·eferred to. Para 13
(2011112 sec 787 referred to. Para 17
2006 (8) Suppl. SCR 398 referred to. Para 19
H (2015) 2 sec 796 relied on. Para 30
THE KERALA BAR HOTELS ASSOCIATION v. STATE OF 263
KERA LA
2001 (5) Suppl. SCR 511 relied on. Para 30 A
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
4157 of2015
From the Judgment and Order dated 31.03.2015 of the
Division Bench of the High Court of Kerala at Ernakulam in W. B
A. No.1554of2014
WITH
C.A. NOS. 4119, 4120, 4121, 4122, 4123, 4124, 4125, C
4126-4136, 4137-4156,. 4158-4159, 4160, 4161-4165,
4166, 4167, 4168, 4169, 4170, 4171, 4172, 4173, 4174,
4175, 4999, 5000, 5374, 4998, 5375, 5032, 5373, 6268,
5791, 5372, 5792, 5793, 5797, 5799, 5800, 5801-5803,
6271, 6272, 6269, 5790, 4118, 6273-6274, 6324 OF D
2015
C.A Sunderam, Mukul Rohtagi, Harin P. Raval, Harish
N. Salve, Rajeev Dhavan, Chander Uday Singh, L. Nageswara
Rao, C.C. Thomas, N. Venkatraman, Amit Singh Chadha, B.P. E
Patil, Nidhesh Gupta, Rohini Musa, Zafar lnayat, Abhishek
Gupta, Romy Chacko, Arunabh Chowdhury, Anupam Lal Das,
Parthiv Goswami, Vaibhav Tamar, Karma Darbee, Swarvesh
Singh Baghel, Diksha Rai, Joe Joseph Kochikunnjel, Ranjeeta
Rohtagi, Dileep Poolakkot, Ashly Harshad, Harshad V. F
Hameed, Sudhi Vasudevan, Sumita Hazarika, Kabir Ghosh,
Dhavan Mehrotra, Rishi K.S. Gautam, Parthiv K. Goswami,
Diksha Rai, Roy Abraham, Seema Jain, Himinder Lal, V. K.
Biju, Nishad LS., Maneesh N., Sathish,A. Sumathi, Sajith. P,
Kumar Gaurav, Nazia Hasan, Malini Poduval, Anu K. Joy, Nishe G
Rajen Shanker, P. K. Manohar, Venkita Subramoniam T. R.,
George Poonthottam, Dileep Pillai, Ajay K. Jain, Atul Shankar
Vinod, M. P. Vinod, Satheesh Mohanan, M.C. Ashi, A.
Raghunath, M. P. Shorawala, Sadhana Sandhu, lpsita Behura,
H
264 SUPREME COURT REPORTS [2015] 11 S.C.R.
A Sanand Ramakrishnan, Rajeev Mishra, G. Prakash, Prerna
Prakash, Beena Prakash, Priyanka Parkash, M. L. Jishnu,
Dilpreet Singh, V. K. Sidharthan, Amjit Maqbool, Chinmoy
Deshpande, Anirudh Sanganeria, B.S. Prasad, D.P. Mohanty,
V.K. Sidharthan, Jishnu M. L. fortheAppellants.
B
Kapil Sibal, V. Giri, Ramesh Babu M. R., Mohammed
Sadique T.A., Mohan Kumar, Swati Setia, ManavVohra, Tom
K. Thomas, Ashok Kumar Juneja, Chand Qureshi, Zulfiker Ali
P. S., Renjith B. Marar, Lakshmi N. Kaimal, Anu Dixit Kaushik,
C Wills Mathews, Amit Kumar Pathak, Ginesh P., Shree Pal
Singh, Kaleeswaram Raj, Suvidutt M.S., C.R. Rekesh Sharma,
Syed Mehdi Imam for the Respondents.
The Judgment of the Court was delivered by
D
VIKRAMAJIT SEN, J. 1. These Appeals call into
question the legal correctness of the Judgment of the Division
Bench of the High Court of Kerala dated 31.3.2015 by which
several Writ Appeals filed by some of the Writ Petitioners
E assailing the Judgment of the learned Single Judge came to
be dismissed and the Writ Appeals filed by the State came to
be allowed. The writ petitioners, which include hotels which
have been classified as Two Star, Three Star, Four Star and
Heritage hotels, challenged the Abkari Policy for the year 2014-
F 15 as well as the amendments to the Foreign Liquor Rules.
While dismissing the writ petitions, the learned Single Judge
carved out an exception vis-a-vis the eligibility of Four Star
and Heritage category hotels to the grant of FL-3 licence,
finding their exclusion to be arbitrary and violative of Article 14
G of the Constitution. This holding resulted in the filing of appeals
on behalf of the State. The impugned Judgment has reversed
this conclusion of the learned Single Judge and consequently
only Five Star hotels in the State of Kerala are presently
permitted to serve alcohol in their bars i.e. in public.
H
THE KERALA BAR HOTELS ASSOCIATION v. STATE OF 265
KERALA [VIKRAMAJIT SEN, J.]
2. TheAbkariAct, 1077was introduced ih the erstwhile A
State of Cochin in 1902 and came to be extended throughout
the State of Kera la in 1967. The Foreign Liquor Rules were
promulgated by virtue of Sections 10 and 24 to 29 of the Abkari
Act, relating to the sale of Indian Made Foreign Liquor (IMFL).
A.c; at present, the private sector is not permitted to manufacture B
IMFL and there is only one State owned distillery. Previous to
the extant policy, FL-1 licences i.e. retail of licence sale of
foreign liquor, were auctioned by the State to private parties,
which practice, as is obvious, has been discontinued. It may
also be relevant to mention that the State of Kerala made a C
futile foray into prohibition, but this was withdrawn in 1967.
The existence of a Union Territory, Mahe, within the State of
Kerala, and boundaries with the States of Karnataka and Tamil
Nadu where the sale or consumption of liquor is not prohibited
0
indubitably makes it almost impossible for the State to venture ..
into prohibition.
3. It has not been disputed that the State of Kerala is
facing an acute social problem because of the widespread
and excessive consumption of alcohol. It appears that almost E
14 per cent of the national consumption of alcohol occurs in
this comparatively territorially small State (indeed a dubious
distinction). which also justifiably boasts of 100 per cent literacy.
Faced with this social malaise, the State Government appears
to have considered that banning the consumption of hard F
alcohol in public may have the effect of bringing down and
arresting the ever escalating addiction to liquor. But we must
immediately record o.ur reservation inasmuch as FL-11
licences for the sale of consumption of beer and wine are
rampantly issued. If the addiction to alcohol or introduction into G
this pernicious habit is to be combated, there s·eems to us to
be no justification to allow beer or wine to be publically
consumed. There cannot be any caveat to the opinion that
permitting the consumption of beer and wine is a gateway to
H
the consumption of hard liquor, and indeed is a social malaise
266 SUPREME COURT REPORTS [2015] 11 S.C.R.
A in itself. In 1992, the grant of FL-3 licence was restricted to
hotels having Two Star and above classification. This was
followed in 1996 by the banning of sale of arrack. In 2002,
Rule 13(3) was amended thereby restricting grant of FL-3
licences to hotels possessing Three Star and above ratings;
B existing Two Star hotels possessing FL-3 licences were
however renewed on the understanding that this was their
bounden right. This policy was taken to the courts and was
eventually settled by the.decision of this Court in State of Kerala
v. B.Six Hotels Resort Private Ltd. 2010 (5) SCC 186 which
C had upheld that policy. Obviously encouraged by this success,
the State of Kerala in 2011 introduced further amenpments to
Rule 13(3) whereby only hotels with Four Star and above
classifications were eligible for fresh FL-3 licenses. Again,
on the predication that existing FL-3 licence holders were
0
legally entitled to their renewal, this exception was recognised
in the Rules. "Distance criteria" was raised and rejected and
we are now no longer concerned therewith. In State of Kerala
v. Surendra Das 2014 (3) SCALE 421; AIR 2014 SC 2762,
E this Court upheld the policy challenged by several writ
petitioners insofar as it declined issuance of fresh FL-3 to
Three Star hotels; the "distance criteria" was struck down. In
the duration of this litigation the State Government had also
made it known that it intended to extend the discontinuance of
F FL-3 licences to Four Star hotels, but this Court thought it
appropriate to interdict that proposal till such time as the Report
of the One-man Commission was published and considered
and till the State took action against non-standard hotels. In
what avowedly is the anticipated and logical progression, the
G State Government has now restricted FL-3 licences to Five
Star hotels alone, and has also decided not to renew all existing
FL-3 licences to any of the other hotels.
4. We think it expedient to reproduce the relevant portion
of said Order dated 22.8.2014:
H
THE KERALABAR HOTELS ASSOCIATION v. STATE OF 267
KERALA [VIKRAMAJIT SEN, J.]
7. The Government being convinced the fact that in order A
to achieve the goal of "Liquor-Free Kerala", strict and
urgent measures are to be adopted, the Abkari Policy
2014-15 is hereby declared subject to the following
criteria.
B
1. Hereinafter Bar licenses will be issued only to 5
star hotels. The licenses of existing bar hotels which
are functioning on the basis of provisional renewal
of licenses except the licenses of 5 star hotels will
be cancelled. The Government has decided not to c
renew the licenses of 418 non standard bar hotels
mentioned in the Judgment of the Supreme Court.
2. 10% of outlets out of 338 FL-1 outlets of Kerala
.State Beverages Corporation and 46 outlets of
Consumer Fed will be closed each year from 2°d D
October, 2014onwards.
3. The sale of high strength alcoholic liquor through
Beverages Corporation will be gradually reduced.
4. In order to rehabilitate the employees who lose their E
job due to the closing of bar and to rehabilitate the
persons who are alcoholically addicted a special
plan namely "Punarjani 2030" will be commenced.
For that purpose, 5% Cess will be imposed on the
liquor which selling through the K.S.B.C. F
5. The Liquor-Free propaganda program will be
strengthened in the society at large and especially
in educational institutions.
6. All Sundays will be declared as dry-day. This will G
implement from the Sunday of 5th October, 2014.
7. The traditional toddy tapping business will be
protected and job security will be ensured for toddy
tappers. H
268 SUPREME COURT REPORTS [2015] 11 S.C.R.
A 8. In order to rehabilitate the employees of closing
bars and employees engaged in the job of affixing
stickers, measures will be adopted. KeralaAlcohol
Education Research, Rehabilitation &
Compensation Fund (KAERCF) Fund will be
B formed in order to protect the retrenched
employees. The said fund will be utilized for the
following purposes such as making propaganda
against drinking of alcohol, for collection of data
regarding this matter, to protect those who
c destroyed themselves by alcohol consumption,
rehabilitation of the persons who lost job. The fund
for this purpose will also be found out from public.
9. To implement the order urgently, the Excise
D Commissioner, K.S.B.C. Managing Director have
to take measures.to submit the recommendations
urgently to the Government.
By order of Governor
A.Ajithkumar
E Secretary
5. The first paragraph of sub-rule (3) of Rule 13 was
substituted bywayofGO.(P) No. 141/2014 and now reads as
follows:
F "(3) Foreign Liquor 3 Hotel (Restaurant) license. -
License in this form may be issued by the Excise
Commissioner under orders of Government, in the
interest of promotion of tourism in the State, to hotels
which have obtained Five Star, Five Star Deluxe
G classifications from the Ministry of Tourism, Government
of India, where the privilege of sale of foreign liquor in
such hotels has been purchased on payment of an annual
rental of~23,00,000 (Rupees Twenty-three lakhs only).
However, no such license shall be issued to hotels if
H
THE KERALABAR HOTELS ASSOCIATION v. STATE OF 269
KERALA [VIKRAMAJIT SEN, J.]
located within 200 (two Hundred) metres from any A
educational institution, temple, church, mosque, burial
ground or scheduled caste/scheduled tribe colony. The
applicant shall produce from the Abkari Workers' Welfare
Fund Inspector, a Certificate to the effect that he has
remitted before the date of application for license/renewal B
of license, the arrears of contributions if any payable up
to the 31 51 day of December of the preceding year."
The sixth proviso to the Rule was amended to read as follows:
"Provided also that the licences which have been renewed C
temporarily from 1'1April, 2014, other than those of the
hotels having Five Star classifications shall be C:ancelled."
6. Litigation pertaining to or challenging liquor policies
is legion in our land. In his inimitable style Justice V.R. Krishna D
Iyer commenced the Judgment of the Three-Judge Bench in
P.N. Kaushal v. Union of India 1978 (3) SCC 558 thus:
A raging rain of writ petitions by hundreds of merchants
of intoxicants hit by a recently amended rule declaring a E
break of two "dry" days in every "wet" week for licensed
liquor shops and other institutions of inebriation in the
private sector, puts in issue the constitutionality of Section
59(t)(v) and Rule 37 of the Punjab Excise Act and Liquor
Licence (Second Amendment) Rules, (hereinafter, for F
short, the Act and the Rules). The tragic irony of the legal
plea is that Articles 14 and 19 of the very Constitution,
which, in Article 47, makes it a fundamental obligation of
the State to bring about prohibition of intoxicating drinks,
is pressed into service to thwart the State's half-hearted G
prohibitionist gesture. Of course, it is on the cards that
the end may be good but the means may be bad,
constitutionally speaking. And there is a mystique about
legalese beyond the layman's ken!
H
270 SUPREME COURT REPORTS (2015] 11 S.C.R.
A 2. To set the record straight, we must state, right here,
that no frontal attack is made on the power of the State
to regulate any trade (even a trade where the turn-over
turns on tempting the customer to take reeling roiling trips
into the realm of the jocose, belliocose, lachrymose and
B comatose).
7. A plethora of precedents on the subject in which we
are presently concerned compels us, in order to avoid prolixity,
to refer to only a few decisions of this Court. We have already
c a mentioned two of these - B.Six Hotels and Surendra Das
to which we will revert later. The Constitution Bench decision
in Krishan Kumar Narula v. State of Jammu and Kashmir
AIR 1967 SC 1368 concerned the challenge to the refusal to
renew licences for the year 1966-67 in respect of the liquor
D shop of that petitioner. This Court observed that "dealing in
liquor is business and a citizen has a right to do business in
that commodity, but the State can make a law imposing
reasonable restrictions on I.he said right, in public interest".
E 8. This very conundrum once again received the attention
of the Constitution Bench in Khoday Distilleries Ltd. v. State
of Karnatka 1995 (1) SCC 574, where the constitutional
provisions pertinent to transacting business in liquor were
considered in minute detail, alohg with decisions which had
F already been ·rendered by this Court. The paragraph extracted
below contains a precis and commends reading:
"60. We may now summarise the law on the subject
as culled from the aforesaid decisions.
G (a) The rights protected by Article 19(1) are not
absolute but qualified. The qualifications are
stated in clauses (2) to (6) of Article 19. The
fundamental rights guaranteed in Article 19(1 )(a)
to (g) are, therefore, to be read along with the
H said qualifications. Even the rights guaranteed
THE KERALABAR HOTELS ASSOCIATION v. STATE OF 271
KERALA [VIKRAMAJIT SEN, J.]
under the Constitutions of the other civilized A
countries are not absolute but are read subject
to the implied limitations on them. Those implied
limitations are made explicit by clauses (2) to (6)
of Article 19 of our Constitution.
B
(b) The right to practise any profession or to carry on
any occupation, trade or business does not
extend to practising a profession or carrying on
an occupation, trade or business which is
inherently vicious and pernicious, and is c
condemned by all civilised societies. It does not
entitle citizens to carry on trade or business in
activities which are immoral and criminal and in
articles or goods which are obnoxious and
injurious to health, safety and welfare of the 0
general public, i.e., res extra commercium,
(outside commerce). There cannot be business
in crime.
(c) Potable liquor as a beverage is an intoxicating
and depressant drink which is dangerous and E
injurious to health and is, therefore, an article
which is res extra commercium being inherently
harmful. A citizen has, therefore, no fundamental
right to do trade or business in liquor. Hence the
F
trade or business in liquor can be completely
prohibited.
(d) Article 47 of the Constitution considers
intoxicating drinks and drugs as injurious to
health and impeding the raising of level of nutrition G
and the standard of living of the people and
improvement of the public health. It, therefore,
ordains the State to bring about prohibition of the
consumption of intoxicating drinks which
obviously include liquor, except for medicinal H
272 SUPREME COURT REPORTS [2015] 11 S.C.R.
A purposes. Article 47 is one of the directive
principles which is fundamental in the governance
of the country. The State has, therefore, the power
to completely prohibit the manufacture, sale,
possession, distribution and consumption of
B potable liquor as a beverage, both because it is
inherently a dangerous article of consumption
and also because of the directive principle
contained in Article 47, except when it is used
and consumed for medicinal purposes.
c
(e) For the same reason, the State can create a
monopoly either in itself or in the agency created
by it for the manufacture, possession, sale and
distribution of the liquor as a beverage and also
D sell the licences to the citizens for the said
purpose by charging fees. This can be done
under Article 19(6) or even otherwise.
(f) For the same reason, again, the State can impose
limitations ,and restrictions on the trade or
E business in potable liquor as a beverage which
restrictions are in nature different from those
imposed on the trade or business in legitimate
activities and goods and articles which are res
commercium. The restrictions and limitations on
F
the trade or business in potable liquor can again
be both under Article 19(6) or otherwise. The
restrictions and limitations can extend to the
State carrying on the trade or business itself to
G the exclusion of and elimination of others and/or
to preserving to itself the right to sell licences to
do trade or business in the same, to others.
{g) When the State permits trade or business in the
potable liquor with or without limitation, the citizen
H has the right to carry on trade or business subject
THE KERALABAR HOTELS ASSOCIATION v. STATE OF 273
KERALA [VIKRAMAJIT SEN, J.]
to the limitations, if any, and the State cannot A
make discrimination between the citizens who
are qualified to carry on the trade or business.
(h) The State can adopt any mode of selling the
licences for trade or business with a view to 8
maximise its revenue so long as the method
adopted is not discriminatory.
(1) The State can carry on trade or business in potable
liquor notwithstanding that it is an intoxicating C
drink and Article 47 enjoins it to prohibit its
consumption. When the State carries on such
business, it does so to restrict and regulate
production, supply and consumption of liquor
which is also an aspect of reasonable restriction 0
in the interest of general public. The State cannot
on that account be said to be carrying on an
illegitimate business.
9. So far as the essential concomitants of Article 14 are E
concerned, we need not, nay, cannot travel beyond the decision
of the Seven-Judge Bench of this Court in In Re: The Special
Courts Bill, 1978, 1979 (1) SCC 380. We shall reproduce
the first 11 propositions carved out in that judgment:
(1) The first part of Article 14, which was adopted from F
the Irish Constitution, is a declaration of equality of the
civil rights of all persons within the territories of India. It
enshrines a basic principle of republicanism. The second
part, which is a corollary of the first and is based on the
last clause of the first section of the Fourteenth G
Amendment of the American Constitution, enjoins that
equal protection shall be secured to all such persons in
the enjoyment of their rights and liberties without
discrimination of favouritism. It is a pledge of the H
274 SUPREME COURT REPORTS [2015) 11 S.C.R.
A protection of equal laws, that is, laws that operate alike
on all persons under like circumstances.
(2) The State, in the exercise of its governmental power,
has of necessity to make laws operating differently on
different groups or classes of persons within its territory
B
to attain particular ends in giving effect to its policies,
and it must possess for that purpose large powers of
distinguishing and classifying persons or things to be
subjected to such laws.
c (3) The constitutional command to the State to afford
equal protection of its laws sets a goal not attainable by
the invention and application of a precise formula.
Therefore, classification need not be constituted by an
exact or scientific exclusion or inclusion of persons or
D things. The courts should not insist on delusive exactness
or apply doctrinaire tests for determining the validity of
classification in any given case. Classification is justified
if it is not palpably arbitrary.
E (4) The principle underlying the guarantee of Article 14
is not that the same rules of law should be applicable to
all persons within the Indian territory or that the same
remedies should be made available to them irrespective
of differences of circumstances. It only means that all
F persons similarly circumstanced shall be treated alike
both in privileges conferred and liabilities imposed. Equal
laws would have to be applied to all in the same situation,
and there should be no discrimination between one
person and another if as regards the subject-matter of
G the legislation their position is substantially the same.
(5) By the process of classification, the State has the
power of determining who should be regarded as a class
for purposes of legislation and in relation to a law enacted
H on a particular subject. This power, no doubt, in some
THE KERALA BAR HOTELS ASSOCIATION v. STATE OF 275
KERALA [VIKRAMAJIT SEN, J.)
degree is likely to produce some inequality; but if a law A
deals-with the liberties of a number of well defined
classes, it is not open to the charge of denial of equal
protection on the ground that it has no application to other
persons. Classification thus means segregation in
classes which have a systematic relation, usually found B
in common properties and characteristics. It postulates
a rational basis and does not mean herding together of
certain persons and classes arbitrarily.
(6) The law can make and set apart the classes according c
to the needs and exigencies of the society and as
suggested by experience. It can recognise even degree
of evil, but the classification should never be arbitrary,
artificial or evasive.
(7) The classification must not be arbitrary but must be D
rational, that is to say, it must not only be based on some
qualities or characteristics which are to be found in all
the persons grouped together and not in others who are
left out but those qualities or characteristics must have a
E
reasonable relation to the object of the legislation. In order
to pass the test, two conditions must be fulfilled, namely,
(1) that the classification must be founded on an
intelligible differentia which distinguishes those that are
grouped together from others and (2) that that differentia
F
must have a rational relation to the object sought to be
achieved by the Act.
(8) The differentia which is the basis of the classification
and the object of the Act are distinct things and what is
'
necessary is that there must be a nexus between them. G
In short, while Article 14 forbids class discrimination by
conferring privileges or imposing liabilities upon persons
arbitrarily selected out of a large number of other persons
similarly situated in relation to the privileges sought to
H
276 SUPREME COURT REPORTS [2015] 11 S.C.R.
A be conferred or the liabilities proposed to be imposed,
it does not forbid classification for the purpose of
legislation, provided such classification is not arbitrary
in the sense abovementioned.
(9) If the legislative policy is clear and definite and as an
B
effective method of carrying out that policy a discretion
is vested by the statute upon a body of administrators or
officers to make selective application of the law to certain
classes or groups of persons, the statute itself cannot
c be condemned as a piece of discriminatory legislation.
In such cases, the power given to the executive body
would import a duty on it to classify the subject-matter of
legislation in accordance with the objective indicated in
the statute. If the administrative body proceeds to classify
D persons or things on a basis which has no rational relation
to the objective of the legislature, its action can be
annulled as offending against the equal protection clause.
On the other hand, if the statute itself does not disclose a
definite policy or objective a nd it confers authority on
E another to make selection at its pleasure, the statute
would be held on the face of it to be discriminatory,
irrespective of the way in which it is applied.
(10) Whether a law conferring discretionary powers on
an administrative authority is constitutionally valid or not
F
should not be determined on the assumption that such
authority will act in an arbitrary manner in exercising the
discretion committed to it. Abuse of power given by law
does occur; but the validity of the law cannot be contested
G because of such an apprehension. Discretionary power
is not necessarily a discriminatory power.
(11) Classification necessarily implies the making of a
distinction or discrimination between persons classified
and those who are not members of that class. It is the
H
THE KERALABAR HOTELS ASSOCIATION v. STATE OF 277
KERALA [VIKRAMAJIT SEN, J.]
essence of a classification that upon the class are cast A
duties and burdens different from those resting upon the
general public. Indeed, the very idea of classification is
that of inequality, so that it goes without saying that the
mere fact of inequality in no manner determines the
matter of constitutionality. B
10. It would now be apposite to discuss both 8.Six
Hotels and Surendra Das in some detail. In 8.Six Hotels,
the Applicant's application for an FL-3 license was rejected
c
by the Excise Authorities resulting in the filing of a writ petition
before the High Court, pursuant to which the Excise
Commissioner was directed to decide the matter afresh.
During the ensuing litigation, Rule 13(3) was amended and a
proviso was added stating that "no new licenses under this
Rule shall be issued". This was the 2002 amendment whereby D
fresh FL-3 licenses were to be allowed only for Three Star hotels
and above. Consequently, the Excise Commissioner rejected
the Applicant's license in view of the abovementioned proviso.
The High Court upheld the amendment but found that the
application had to be considered with reference to the Rules E
as they existed on the date of the application and not the date
of consideration of the application. When the matter reached
this Court, we held that the Rules had to be considered as
extant on the date of consideration of the application. This Court
opined that since "the State has exclusive privilege of F
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, G
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 H
278 SUPREME COURT REPORTS (2015] 11 S.C.R.
A application." It was also noted that the promotion of tourism is
to be balanced with general public interest. If the State finds
that sufficient licenses have already been granted or that no
more should be granted in the public interest, it can take a
policy decision not to grant any further licenses. "If the policy is
B not open to challenge, the amendments to implement the policy
are also not open to challenge." It was on this dialectic that the
proviso was upheld.
11. In Surendra Das, the Writ Petitioner had challenged
C the denial of an FL-3 license to his Three Star hotel on the
basis of the 2011 amendment to Rule 13(3) which restricted
fresh licenses to hotels of Four Star and above classifications.
The newly introduced 'Distance Rule' was also challenged. The
Single Judge therein dismissed the writ petition, finding no
D vested right to get a license, no element of discrimination and
no legitimate expectation. The Division Bench, however, found
no distinction between existing Three Star hotels and new
ones, and held that the decision to set up hotels should be left
to hoteliers. It found both the amendments bad in law. This
E Court again reaffirmed that there is no fundamental right to
trade in liquor. Since the deletion of Two Star hotels was upheld
in B.Six Hotels, the deletion of Three Star hotels was upheld
on the ground that it falls in the same genre. This Court
F dismissed the contention of the Writ Petitioner that the plea
under Article 14 was not specifically considered in B.Six
Hotels, inasmuch as B.Six Hotels allowed for a periodic
assessment of government policy and for the promotion of
tourism to be balanced with the general public interest. It has
G been pointed out by the Appellants herein that this Court went
on to find that Two Star and Three Star hotels stand on a
different footing than those of Four Star and Five Star
classifications, as per the classification of the Ministry of
Tourism and the fact that only the latter is required to have a
H bar license. However, this finding was clearly obiter and must
THE KERALABAR HOTELS ASSOCIATION v. STATE OF 279
KERALA [VIKRAMAJIT SEN, J.]
be treated as such. The Distance Rule was struck down, with A
a finding that "although we do not dispute the power of the
State Government to bring about the necessary reform, by
modifying the rules, it has got to be justified on the cornerstone
of the correlation between the provision and the objective to
be achieved. If that correlation is not established, surely the B
rule will suffer from the vice of arbitrariness and therefore will
be hit by Art. 14." This Court also noted that if the State is
genuinely serious about reducing liquor consumption, it should
take steps to reduce its own shops and depots and behave in
conformity with the mandate of Article 4 7. The limitation of fresh C
licenses to Four Star hotels and above was upheld, but the
State Government was directed not to deny FL-3 licenses to
hotels with Four Star and above classifications until the receipt
of the report of the One Man Commission, and until action is
0
taken against non-standard restaurants who have been
permitted under the sixth and seventh proviso of Rule 13(3).
12. As we have already delineated, it is in the wake of
these two judgments that the further restriction of FL-3 licenses
to Five Star hotels alone was prescribed. As previously E
mentioned, the learned Single Judge in the detailed judgment
dated 30.10.2014, upheld the petitions of the Four Star and
Heritage category hotels, but declined those of Two Star and
Three Star and unclassified hotels. Upon a detailed discussion F
of the judgment in Khoday, it was found that a citizen has no
fundamental right to conduct trade or business in potable liquor.
However, in the event of the State permitting of trade or
business in potable liquor with or without limitation, the aitizen
has the right not to be discriminated against. Any regulatory G
measure would thus have to satisfy the test of Article 14. It
rejected the arguments of the Appellants that the field of
-• prohibition is occupied by the Prohibition Act, 1950 and that
the present policy is outside the scope of the object of the
AbkariAct as it aims at bringing about prohibition. It was also H
280 SUPREME COURT REPORTS [2015] 11 S.C.R.
A held that where a change of policy is valid in law, any action
taken pursuant to it cannot be attacked or invalidated on the
ground of legitimate expectations. Regarding the challenge
on the basis of Article 14, the Single Judge discussed the
position of Two Star and Three Star hotels separately from
B Four Star and Heritage hotels. Regarding the former, it was
held that their contention that the classification is discriminatory
is no longer res integra in view of the dictum of this Court in
B.Six Hotels and Surendra Das. So far as the Four Star
hotels are concerned, the Single Judge noted that there are
C only 20 Five Star hotels in Kerala and only 33 hotels in the
Four Star and Heritage categories. It was held that none of the
material before the State Government proposed the exclusion
of Four Star and Heritage hotels from the criterion of eligibility
for bar licenses. While there is a presumption that the
0
Government has full knowledge of the social aspects of the
proposed controls, in the absence of any material on the record,
this presumption cannot be pushed to the extent of presuming
that the State could have possessed some undisclosed and
E unknown reason or material to justify its action. The One Man
Commission and the Tax Secretary recommended the grant
of licenses to hotels with sufficient facilities. The learned Single
Judge in Surendra Das noted that Three Star, Four Star and
Five Star hotels constituted a distinct class. Even Rule 13(3)
F of the Foreign Liquor Rules maintained a distinction between
Four and Five Star hotels and those of Three Stars and below,
by prescribing that the former have to maintain a distance of
only 50 meters from educational and religious institutions. The
Govt!rnment did not even state the reasons for rejecting the
G recommendations in the Reports before it. The learned Single
Judge accordingly held that the policy was violative of Article
14 and it was struck down inasmuch as it excluded Four Star
and Heritage category hotels from being granted FL-3
licenses.
H
THE KERALA BAR HOTELS ASSOCIATION v. STATE OF 281
KERALA [VIKRAMAJIT SEN, J.]
13. This decision was set aside by the Division Bench A
in an equally detailed judgment dated 31.3.2015. The Division
Bench opined that though the Government ' was bound to
consider the recommendations of the One Man Commission,
it was not bound to accept the Report in its entirety. The Report
was simply a piece of evidence which the Government would B
have to take note of. It was for the State to evolve a policy
taking into account the welfare of the people, and the Courts
have a very narrow and limited scope to intervene in such policy
decisions. It is also not for the Courts to find whether a more
feasible view is possible or whether a better policy could be C
evolved, which intrinsically remains a subjective exercise. The
Division Bench also differentiated the factual matrix obtaining
before it from that in State of Maharashtra v. Indian Hotel and
Restaurants Association (2013) 8 SCC 519, commonly D
referred to as the Dance Bar case, on the premise that in the
latter the fundamental rights of thousands of dancing girls was
also in issue, and dancing in itself is not harmful to the health,
although it could affect the morality of people and the dignity of
women based on the manner in which the dance was E
performed: The Division Bench noted that the impugned policy
is in consonance with Article 47 of the Constitution which
provides that the State shall regard the raising of nutrition and
the standard of living of its people and the improvement of
public health as among its primary duties, in particular F
endeavoring to bring about prohibition. All the relevant
documents and Reports were available to the Government at
the time it made the impugned policy, ergo it should be
assumed that the Government duly deliberated on them. It was
held that Four Star, Five Star and Heritage category hotels G
cannot be said to form a single class by themselves, as
different yardsticks are provided for each of these categories.
The Division Bench noted that the object of the policy is the
reduction of consumption of alcoholic beverages in public
places and the protection of the youth from the adverse H
282 SUPREME COURT REPORTS [2015] 11 S.C.R.
A consequences of consumption of alcohol. Additionally, it was
an ongoing policy, so the declaration that FL-3 licenses were
being restricted to only Five Star hotels could not have come
as a surprise. It was found that the One Man Commission
Report was considered by the Government, as evidenced by
B various terms in the policy, and it was not necessary for the
Government to accept the recommendations in their entirety.
The appeals filed by the Two Star, Three Star and unclassified
hotels were therefore dismissed, and the appeals filed by the
State were allowed.
c
14. In the interest of avoiding prolixity, we shall refrain
from recording the arguments before us in unnecessary detail.
Instead, we shall begin our analysis by laying out the crux of
the arguments of learned Senior Counsel for the Respondent,
D who has submitted that the Government has the right to devise
whatever policy it thinks expedient, and the Court should only
interfere if the policy is ma/a fide or the measures proposed
are ex facie so extraneous to the object of the policy that no
reasonable person would have resorted to the same.
E Furthermore, since trade in and sale of liquor is the exclusive
privilege and preserve of the Government, it has the freedom
to decide whether to part with its privilege and to what extent it
should do so. It has also been submitted that the end goal of
F the impugned policy is for Kerala to become liquor-free. This
does not have to be achieved in one fell swoop, but can be
introduced in whatever piecemeal manner the Government
reasonably sees fit. In fact, the State has been taking steps to
this effect for decades, and has been endeavouring to reduce
G the consumption of alcohol in public since 1992. The State
should be allowed to experiment to see which version and
variation of its policies achieves the best result. It may well
choose to revoke an unsuccessful policy at some later date. •
To make such policies is within the power of the State, and in
H the face of the current ground reality, even a policy which
THE KERALA BAR HOTELS ASSOCIATION v. STATE OF 283
KERALA [VIKRAMAJIT SEN, J.]
achieves only a partial reduction in the amount of alcohol A
consumed in the State would be considered a success for the
State.
15. The State's policy to achieve a liquor-free Kerala has
three constituents. The first is regarding manufacture. B
Manufacture is no longer in private hands, and no licenses
have been given since 1999. There is only one Government
distillery in the State, thus giving the State the necessary control.
Secondly, wholesale and retail supply has been under the
control of the State since 1984. The Government has taken C
steps to curb consumption by reducing the number of FL-1
shops by over 10 per cent, from 384 to 332, between 2014
and 2015. The third element, which is pertinent on the facts
before us,. is regarding consumption which is in alarming
proportion in Kerala especially when compared to other States. D
The Table produced below is relevant in understanding the
consumption trends in the State. As much as 80 per cent of
the sale ·of alcohol is through the State monopoly outlets
possessing FL-1 licences, aggregating Rs.6260/- crores in
2012-13. In stark contrast, the smallest percentage of sales is E
in Five Star hotels.
' 2010-2011 r ai11-2012 2012-2013
Qlegory Value in % Vai.e in % Value in %
: Oures 0-cres Ooros - --- --
5 Ster · · · i 2.25 o.64 - ' · 1f18 o.13 6.32 0.08
4 Ster 13.58 0.21 , 1581 0.22 33.26 04
3 Ster 1
448.71 7.09 I 539.12 7.35 644.19 7.76
2 Ster I 150.31 2.38 171.63 2.34 195.73 2.36
UN : 854.8 13.5 I 955.:Il 13.03 112623 13.56
STARRED ' ,
FL-1 SHYS I. 48Z3 762T-i~561i- 76.53 75.39
HERITAGE 4.93 0.08 I 8.04 0.11 12.34 0.15
a.ASSIRED 29.89 0.47 i 19.77 0.27 24.55 0.29
TOfAL \6328.75 100 , 7332.13 100 Bn3.65 100
284 SUPREME COURT REPORTS [2015) 11 S.C.R.
A 16. In its attempt to reduce the consumption of alcohol in
Kerala, the Government has· decided to curb public drinking.
This is enshrined in Section 15C of the Abkari Act, which is
laid out below for the facility of reference:
B 15C. Consumption in public places. - No person shall
consume liquor in any public place unless consumption
of liquor in any such place is permitted under a license
granted by the Commissioner.
Explanation I. - For the purpose of this section, "public
c place" means any street, Court, Police Station [or other
public office or any club] or any place of public amusement
or resort or on board any passenger boat or vessel or
any ["public passenger or goods vehicle"] or dining or
refreshment room in a restaurant, hotel, rest-house,
D travellers bungalow or tourist bungalow where different
individuals or groups of persons consume food but shall
not include any private residential room."
Rule 13(3) of the Abkari Rules is thus an exception to
E Section 15C, for the purpose of tourism. The situation before
us, then, is not as simple as the Constitutional rights of hotels
of Four Star and below classifications being violated because
of a policy granting FL-3 licenses only to Five Star hotels. The
question is whether the policy to ban consumption of alcohol
F in public or the exception carved out of this policy in favour of
Five Star hotels is violative of the rights under Article 14 and
Article 19 of hotels of Four Star and below classifications.
17. The Appellants have submitted that their rights under
G Article 14 have been violated. ltis trite lawthatArticle 14 allows
for reasonable classifications, where the classification fulfils
the dual criteria of being based on a reasonable differentia
which has a nexus with the object sough to be achieved. The
Appellants have submitted thatthere is no intelligible differentia
H in the creation of classes, on their predication that Four Star
THE KERALA BAR HOTELS ASSOCIATION v. STATE OF 285
KERALA [VIKRAMAJIT SEN, J.]
and Five Star hotels form one homogenous class. It has been A
argued that this Court in Surendra Das came to a finding that
Four Star and Five Star hotels are in a different category than
those with a lower classification; that the Tourism Department
imposes an obligation on both Four Star and Five Star hotels
to have a bar; that the requirements for classification as Four B
Star and Five Star are very similar. It has also been submitted
that no empirical evidence has been adduced by the State to
show that the degree of harm caused by Four Star and Heritage
hotels is different from that of a Five Star, thereby justifying the
disparate and differential treatment between them. Reliance C
has been placed on the decision on the Nine-judge bench in
In Re: The Special Courts Bill, 1978 which held that "all
persons similarly circumstanced shall be treated alike both in
privileges conferred and liabilities imposed. Equal laws would
0
have to be applied to all in the same situation, and there should
be no discrimination between one person and another if as
regards the subject-matter of the legislation their position is
substantially the same." We have already discussed this
landmark exposition of Constitutional law above. It has also E
been argued that since the object of the policy pertains to the
situs of drinking, the State can distinguish between public and
private places, but not between public places. Furthermore,
the Explanation to Section 15C of the Abkari Act, in its
clarification of what constitutes a public place, makes a class F
of all the public places listed therein. Hotels are thus included
in the category of public places. In making an exception for
only Five Star hotels, the Government is engaging in sub-sub-
classification, which amounts to hostile discrimination.
Additionally, the class created under Section 15C was created G
by anAct, and cannot be altered under a rule making power.
The classification at hand is based on social and economic
class, as there is a clear distinction between the expense and
resultantly the clientele of the hotels that have been allowed
FL-3 licenses and those that have not. Therefore, a strict scrutiny H
286 SUPREME COURT REPORTS [2015) 11 S.C.R.
A test must be applied, and the Government must be asked to
provide a rigorous, detailed explanation in this classification.
As was elucidated in Ashok Kumar Thakur v. Union of India
(2011) 12 sec 787, when discrimination is based on class, it
is more pernicious and needs careful judicial enquiry.
B
18. The Appellants before us have also argued thatthe
subject categorization has no reasonable nexus with the object
sought to be achieved. Since the purpose is to achieve
prohibition albeit in a staggered and piecemeal process, this
C cannot be achieved while there are no limits on the number of
FL-1 shops or the number of Five Star Hotels. The intention of
the Government is facially financially driven, as while it is
denying FL-3 licenses to hotels with Four Star and below
classifications, it is improving the infrastructure in FL-1 shops,
D all of which are State owned. The previous clientele of the hotels
that lost their FL-3 licenses are now frequenting these shops.
19. The Appellants have further contended that the policy
suffers from the vice of arbitrariness, which is antithetical to
E equality. The One Man Commission Report and the Tax
Secretary's Report have not been taken into consideration,
as is evident from the fact that the suggestions therein have
not been incorporated and no explanation has been given for
this. Mere lip service was paid to the One Man Commission
F Report. As was held in Reliance Airport Developers Pvt. Ltd.
v. Airports Authority of india and Ors. (2006) 10 SCC 1, if a
policy maker leaves out important factors, this is a ground to
contend unreasonableness. The failure to consider the One
Man Commission Report before passing the impugned policy
G also went against the instructions of this Court in Surendra
Das. Thus the impugned policy was arbitrary, unreasoned and
procedurally unsound. Furthermore, it was contended that
reissuance is a matter of right. At the time of applying for a
H license, the chance of reissuance is a consideration. The
procedure for a renewal and for a fresh application are different.
THE KERALA BAR HOTELS ASSOCIATION v. STATE OF 287
KERALA [VIKRAMAJIT SEN, J.)
More significantly, the State, before this Court in Surendra A
Das, submitted that renewal is a matter of right, and it was
held in B.Six Hotels that license holders have a vested right.
Finally, it has been argued that the burden of proof is on the
person seeking to deviate from equality, Le. the Respondent
State, since a prima facie case of discrimination is made out. B
20. The Respondent, on.the other hand, has contended
that the classification has been based on a reasonable
differentia. In both B.Six Hotels and Surendra Das,
classification based on Star gradation has been accepted by C
this Court. This classification was not created by the
Respondent State, but is a clear classification process with
specifically laid out requirements. In response to the arguments
of the Appellants, it was contended that in Surendra Das, the
differentia or absence of it in the case of Four Star and Five D
Star hotels was not in issue and therefore this issue is at large.
In fact, in t.he course of submissions in Surendra Das, the ·
Respondent had made bold that it intended to prohibit the grant
of FL-3 licenses even to Four Star hotels. According to
Khoday, the State cannot discriminate between people who E
are qualified to carry on trade in liquor once it is allowed by the
State. Since only Five Star hotels are qualified, the State would
be at fault if it discriminated between different Five Stars hotels,
and t.his would amount to a classification without reasonable F
differentia. However, the facts at hand are entirely different.
Regarding the argument that in light of Section 15C, the
classification herein amounts to· sub-sub-classification, the
Respondent has argued that.the Explanation was a definition
clause and merely listed the places that come under the G
umbrella of"public place". It did not create a class in anyway.
21. It was contended that the policy did have a
reasonable nexus with the object sought to be achieved, as
the object of the policy, as enshrined'in Section 15C, was to H
reduce the public consumption of liquor. An exception was
288 SUPREME COURT REPORTS [2015) 11 S.C.R.
A made in the interest of tourism under Rule 13(3) in favour of
Five Star hotels. By making liquor less easily and readily
available for consumption in public, and by making it
prohibitively expensive, this object would no doubt be achieved.
Additionally, the sections of society who were particularly at
B risk, such as the youth, would practically be compelled to
abstain from public consumption of alcohol. The argument that
liquor is still available for consumption in private was, it was
argued, irrelevant, but nonetheless it was submitted that the
State has reduced the number of FL-1 shops by over 10 per
C cent in the past year.
22. The Respondent contended that the policy is not
arbitrary. The reason for refusing to grant FL-3 licenses to Four
Star hotels is the fear that all the Three Star establishments in
D the State will try to get upgraded to Four Stars. Furthermore,
all relevant documents were taken into consideration. There
was no obligation on the State to accept the submissions of
the One Man Commission or the Tax Secretary. It simply had
to take their reports into consideration, which it did. This is
E evidenced by the fact that a number of the suggestions in the
One Man Commission were implemented. The contention that
renewal is matter of right was rejected. It was argued that it is,
in fact, a privilege, since there can be no legitimate expectation
F · in the business of liquor, which is res extra commerc(um. It
was argued that the footprint of Article 14 would be narrower
because of the pernicious nature of the activity than it would
have been for a legitimate frade. Finally, it was submitted that
constitutionality is presumed, so the burden of proof is on the
G person alleging that their rights under Article 14 have been
violated.
23. The next ground for challenge has been under Article
19. Learned Senior Counsel·for the Appellants, Mr. Aryaman
H Sundaram, has sought to argue that a right under Article
19(1 )(g) exists in the business of liquor. In his detailed
THE KERALA B./.IR HOTELS ASSOCIATION v. STATE OF 289
KERALA i'JIKRAMAJIT SEN, J.]
elucidation of the decision in Khoday, he has contended that A
the State is given three options. The first is prohibition, the
second is a State monopoly in manufacture or trade or both in
potable liquor, and the third, which is similar to the case at
hand, is that the State allows private individuals into this
business, in which event everyone would have a right to partake B
in it. Reliance was placed on the following paragraphs of
Khoday:
55. The contention that if a citizen has no fundamental
right to carry on trade or business in potable liquor, the c
State is also injuncted from carrying on such trade,
particularly in view of the provisions of Article 47, though
apparently attractive, is fallacious. The State's power to
regulate and to restrict the business in potable liquor
impliedly inc[udes the power to carry on such trade to D
the exclusion of others. Prohibition is not the only way to
restrict and regulate the consumption of intoxicating
liquor. The abuse of drinking intoxicants can be prevented
also by limiting and controlling its production, supply and
consumption. The State can do so also by creating in E
itself the monopoly of the production and supply of the
liquor. When the State does so, it does not carry on
business in illegal products. It carries on business in
products which are not declared illegal by completely
prohibiting their production but in products the F
manufacture, possession and supply of which is
regulated in the interests of the health, morals and welfare
of the people. It does so also in the interests of the
general public under Article19(6) of the Constitution.
G
56. The contention further that till prohibition is introduced,
a citizen has a fundamental right to carry on trade or
business in potable liquor has also no merit. All that the
citizen can claim in such a situation is an equal right to
carry on trade or business in potable liquor as against H
290 SUPREME COURT REPORTS [2015] 11 S.C.R.
A the other citizens. He cannot claim equal right to carry on
the bl\siness against the State when the State reserves
to itself the exclusive right to carry on such trade or
business. When the State neither prohibits nor
monopolises the said business, the citizens cannot be
B discriminated against while granting licenses to carry on
such business. But the said equal right cannot be
elevated to the status of a fundamental right.
Khoday also held that all rights under Article 19(1) of
c the Constitution are not absolute, as they are qualified by the
respective clauses (2) to (6) of Article 19. Business in liquor is
further regulated by the rigours of Article 47. However, the
categorization of dealing in liquor as a "qualified fundamental
right" cannot be interpreted to indicate that a right under Article
D 19(1 )(g) does not arise. This is in line with the previous Five-
Judge bench decision in Krishan Kumar Narula, which, as
we previously discussed, returned the opinion that a citizen
can have a right to deal in liquor, subject to reasonable
restrictions in the· public interest. Thus since Five Star hotels
E are given a right to deal in liquor, all other categories of hotels
can claim on the grounds of Article 19(1 )(g), subject to the
reasonable restrictions allowed by Article 19(6). It has been
contended that the restrictions imposed herein are not
reasonable, for various reasons, including that the relevant
F material has not been considered so the restriction was
arbitrary and unreasoned. The Division Bench, while
overturning the finding of the Single Judge that the relevant
materials were not considered, held that "we cannot assume
G that the Government did not consider the report at all." The
Appellants contend that an assumption that the materials were
considered merely because nothing on the record definitively
says that they were not is erroneous.
24. We disagree with the submissions of the
H Respondents that there is no right to trade in liquor because it
THE KERALABAR HOTELS ASSOCIATION v. STATE OF 291
KERALA [VIKRAMAJIT SEN, J.]
is res extra commercium. The interpretation of Khoday put A
forward by Mr. Sundaram is, in our opinion, more acceptable.
A right under Article 19(1)(g) to trade in liquor does exist
provided the State permits any person to undertake this
business. It is further qualified by Article 19(6) and Article 47.
The question, then, is whether the restrictions imposed on the B
Appellants are reasonable.
25. We have had the privilege and indeed the pleasure
hearing the extremely erudite arguments of a galaxy of senior
counsel on both propositions on the interpretation of our C
Constitution and the laws pertaining to the right to carry on
trade or business in potable liquor by this Court. In Krishan
Kumar Narula, the Constitution Bench was of the opinion that
dealing in liquor is a legitimate business, although the State
can impose reasonable restrictions. A few years later, however, D
in Khoday, the concept of res extra commercium came tc be
accepted and applied to the business of manufacture and trade
in potable liquor. This Court, however, did not place any
embargo or constraints on the State to transactthis business.
History has painstakingly made it abundantly clear that E
prohibition has not succeeded. Therefore strict state regulation
is imperative. The State of Kerala had in the past forayed into
prohibition, but found it to be unimplementable. Thereafter,
keeping in mind the heavy consumption·of alcohol within the F
territory, it has·experimented with other measures to user.
temperance if not abstemiousness. So far as this trade is
concerned, Article 47 of the Constitution places a
responsibility. on every State Government to at least contain if
not curtail consumption of alcohol. The impugned Policy, G
therefore, is to be encouraged and is certainly not to be struck
down or discouraged by the Courts. How this policy is to be
implemented, modified, adapted or restructured is the province
of the State Government and not of· the Judiciary. The
consumption of to~acco as well as liquor is now undeniably H
292 SUPREME COURT REPORTS [2015] 11 S.C.R.
A deleterious to the health of humankind. Advertising either of
these intoxicants has been banned ·in most parts of the world,
the avowed purpose being to insulate persons who may not
have partaken of this habit from being seduced to start.
Banning pubic ronsumption of either of these inebriants cannot
B be constrained as not being connected in any manner with the
effort to control consumption of tobacco, or as we are presently
concerned, with alcohol. Vulnerable persons, either because
of age or proclivity towards intoxication or as a feature of peer
pressure, more often than not, succumb to this temptation.
C Banning public consumption of alcohol, therefore, in our
considered opinion, cannot but be seen as a positive step
towards bringing down the consumption of alcc1hol, or as
preparatory to prohibition.
D 26. A concerted effort has been made before us, as has
been done several times before in this Court, to assail and
attack the impugned State policy on the anvil of Article 14 of
the Constitution. To meetthetests ofthisArticle, i.e. the right
to equality, there has to be intelligible differentia in the
E classification orthe categorisation that has been carved out
either by the Legislation or by the State policy has to be
discernable. So far as the State of Kerala is concerned, steady
progression in this regard is perceptible inasmuch as it had
F started by placing a ban on the consumption of alcohol firstly
on un-starred hotels, followed by Two Star hotels, which
received the unqualified imprimatur of this Court in B.Six
Hotels. Encouraged and emboldened by this decision, the
Government thereafter placed a ban on Three Stars hotels,
G which was again assailed in Court on the predication that a
ban exempting Four Star, Five Star and Heritage hotels. created
a hostile and unfair discrimination. There was another element
in this litigation, namely that those who had received licences
were found to possess vested rights towards their renewal.
H There was also a challenge to. the distance .criteria prescribed
THE KERALA BAR HOTELS ASSOCIATION v. STATE OF 293
KERALA [VIKRAMAJIT SEN, J.]
by the State. All these grounds of assailment did not find favour A
yet again with the Co-ordinate Bench in Surendra Das. We
· are not impressed by the argument that this Court had reached
a specific finding to the effect that Four Star and Five Star
hotels formed a homogeneous class which brooked no further
segregation therein. That was not an issue which fell to be B
decided in Surendra Das. An observation made in·passing
or obiter has persuasive value but is not binding on us. We
appreciate that even at this ·stage it has been clarified on behalf
of the State of Kerala that they intend to prohibit public
consumption of alcohol even in Four Star and Heritage hotels. C
We cannot also lose sight of the fact that it is not the State
which has imposed the classification of Star gradation of
hotels. This is done by the Ministry of Tourism, which in turn is
further guided by the criteria established in the hospitality trade.
0
Placing a moratorium on all hotels other than Five Star hotels, ·
therefore, is not a violation of Article 14 of the Constitution.
The argument on behalf of the Appellants pertaining to
impermissibility of sub-classification on the grounds that
Section 15C of the Abkari Act creates a composite class of E
public places is riot acceptable to us. The Explanation to this
Section endeavours to include through iteration all public
places. Its intent and purport is not to exclude some places; it
cannot be read as a comprehensive definition; it is more of an
illustration. Atthis juncture, it is nobody's case that some hotels F
ought to have been granted Five Star grade or that the State
has prohibited anyone from endeavourin.g to upgrade their
hotels from Four Star to Five Star. We.have already noted that
the least amount of sale of alcohol (0.08 per cent) occurs in
Five Star hotels, which sale indubitably includes guest orders G
· in room-service. We cannot therefore detect any arbitrariness
or capriciousness either in the classification, nay the unique
treatment given by the State to hotels possessing Five Star
rating. The immediately succeeding question that arises is·
whether this classification has a reasonable nexus to the object H
294 SUPREME COURT REPORTS [2015] 11 S.C.R.
A sought to be achieved by the policy. In this regard, there can
be no gainsaying that the prices/tariff of alcohol in Five Star
hotels is usually prohibitively high, which acts as a deterrent to
individuals going in for binge or even casual drinking. There
is also little scope for cavil that the guests in Five Star hotels
B are of a mature age; they do not visit these hotEils with the sole
purpose of consuming alcohol. Learned Senior Counsel for
the State Mr. Sibal has taken us at great len~1th through the
One Man Commission Report to 'establish that the State duly
considered the recommendations therein and incorporated a
C number of them. It is trite that since the obligation on the State
was to consider the Report, not to incorporate it in its entirety,
no legal requirement has been transgressed. We agree with
these submissions. The policy cannot, therefore, be written off
as arbitrary or procedurally unsound.
0
27. We now move to the arguments predicated on Article
19 of the Constitution. We have already noted that the business
in potable liquor is in the nature of res extra commercium and
would therefore be subject to more stringent restrictions than
E any other trade or business. Thus while the ground of Article
19(1 )(g) can be raised, in light of the arguments discussed
with regard to Article 14, it cannot be said that the qualification
on that right is unreasonable.
F 28. We have already expressed our view that it is not the
State that makes classification of Star Rating so far as hotels
are concerned. This is intrinsically modulated by the Tourism
Industry and not by the State Government. It seems to us that
the impugned policy of eradicating consumption of alcohol in
G public applies to all stakeholders without except1ion. However,
thereafter a relaxation or exception, in the inten~st of tourism,
has been forged in favour of Five Star hotels alone so far as
the drive against public consumption of liquor is concerned. In
H other words, were it not for considerations of tourism, this
1
THE KERALABAR HOTELS ASSOCIATION v. STATE OF 295
KERALA [VIKRAMAJIT SEN, J.]
exception in favour of Five Star Hotels may have been struck A
down. As already noted, Courts should be chary from
interfering in policy matters, by infusing or imposing its
assessment of the policy. .The Court may well opine that there
is close similarity between Five Star and Four Star and
Heritage Hotels with regard to foreign clientele; but that B
segregation or selection is the preserve of the State
Government. This is altogether different from viewing the
position from the stand point of creating a classification in favour
of Five Star hotels. The State can draw support from Rule
13(3) which postulates that special measures for the promotion C
of tourism can be ordained by the State. We cannot subscribe
to the view that this Rule violates Section 15C of the Abkari
Act.
29. We also note what is certainly a strong criticism to D
the State policy on alcohol, namely, that FL-1 sales are a State
monopoly and result in almost 80 per cent of the sales in the
State of Kerala. The State has asserted that in keeping with
its objective of bringing down alcohol sale it has devised and
implemented a 10 per cent cut in the number of FL shops. E
This assertion of the State has been contested on the grounds
that the sales have not reduced as a result, but we find no
reason to disagree or doubt the bona fides of the State. The
Court cannot be blind to the fact that a social stigma at least F
as far as the family unit is concerned still attaches to the
consumption of alcohol. Free trade in alcohol denudes family
resources and reserves and leaves women and children as
its most vulnerable victims. Purchasing alcohol from a FL-1
shop would entail consuming it under the reproachful gaze of G
the dependants, especially the female members of the family.
This is certainly a discouragement to regular and excessive
consumption of alcohol. We must accept that that the possibility
exists that rooms may be rented.in Three and Four Star hotels,
where alcohol can be brought from FL-1 shops and then H
t
I
296 SUPREME COURT REPORTS [2015] 11 S.C.R.
A consumed. However, this does not constitute public
consumption, and therefore is not fatal to the besieged State's
policy. We must not lose sight of the fact that the challenge to
this policy in respect of Three Star tiotels and below has been
repulsed by this Court and we see no reason to depart from
B the path traversed by this Court in B.Six Hotels and thereafter
in Surendra Das.
30. There has been abundance of litigation on the
question of the Courts'· interference in State policy. Judicial
C review is justified only if the policy is arbitrary, unfair or violative
of fundamental rights. Courts must be loathe to venture into
an evaluation of State policy. It must be given a reasonable
time to pan out. If a policy proves to be unwise, oppressive or
mindless, the electorate has been quick to make the
D Government aware of its folly. As was recently held by a Three-
judge bench of this Court in Census Commissionm v. R.
Krishnamurthy (2015) 2 SCC 796:
From the aforesaid pronouncement of law, it is clear as
E noon day that it is not within the domain of the courts to
embark upon an enquiry as to whether a particular public
policy is wise and acceptable or whether a better policy
could be evolved. The court can only interfere if the policy
framed is absolutely capricious or not informed by
F reasons or totally arbitrary and founded ipse dixit
offending the basic requirement of Article 14 of the
Constitution. In certain matters, as often said, th1~re can
be opinions and opinions but the Court is not expected
to sit as an appellate authority on an opinion.
G
We find no illegality or irrationality with the intention of the State
to clamp down on public consumption of alcohol. The One
Man Commission Report has been considered, so the policy
does not suffer from the vice of arbitrariness. In these
H circumstances, it is not for the Appellants to argue orfor us to
I
THE KERALABAR HOTELS ASSOCIATION v. STATE OF 297
KERALA [VlKRAMAJIT SEN, J.]
hold that the goal of prohibition would be more likely to be met A
by reducing the number of FL-1 shops or by introducing any
other measure. As was held in Balco Employees' Union
(Regd.) v. Union of India and Ors. (2002) 2 SCC 333, in a
democracy, it is the prerogative of the elected Government to
implement and follow its own policy, even if this adversely B
affects some Vested interests, and the Court may not strike
down a policy "at the beh.est of a Petitioner merely because it
. has been urged that a different policy would have been fairer
or wiser or more scientific or more logical."
c
31. Nonetheless, we must express our distress at the
allegations made, not without some substance, that Five Star
hotels have opened out some of their premises for
consumption of liquor not only at depressed rates but also in
surroundings which are not commensurate to their Five Star D
ratings. This may be a good and sufficient reason to denude
these Hotels of their Five Star gradation. Such malpractice
will have to be immediately erased by the State, as its failure
to do so it will only invite further litigation on the grounds that
the policy to prohibit public consumption of alcohol is only E
cosmetic and partisan. As in the case of Five Star hotels
violating the ambiance which they portray by enabling drinking
in specially created bars at lower prices, the unregulated
permission to consume beer and wine throughout the State by
freely.granting FL-11 licenses also is extremely difficult to F
appreciate. This is particularly problematic in light of the finding
of the One Man Commission that beer is the preferred drink
among the youth. The argument of the Respondent State is
that allowing public consumption of liquor of a lower alcohol G
content is acceptable as such liquor is less likely to lead to
intoxication or addiction and less harmful to the health of the
consumer. This assessment may be misplaced. If the sale of
beer and wine as a consequence of grant of FL-11 licenses
discloses an increase or if there is a trend towards serving H
298 SUPREME COURT REPORTS [2015] 11 S.C.R.
A beer of a higher alcohol content, the State will have to review
its stand, failing which it would. inexorably invite further litigation.
This curial warning also applies to any laxity in policing or
ensuring that no person below the permissible age is allowed
to consume alcohol in public. Additionally, we must note that
B thousands of workers at bars that lost their FL-3 licenses have
been rendered unemployed as a result of the impugned policy,
leading to over a dozen suicides. The State has imposed a 5
per cent cess on liquor sold in FL-1 shops for the purpose of
rehabilitation of these workers. However, it has been argued
C before us that the amount mobalised by this cess is not being
properly implemented. If this is indeed the case, the High Court
may be approached to address this grievance. It does not
affect the legality of the policy impugned before us, butthere
is no doubt that these workers do have a right to be
0
rehabilitated. The State may be sanguine in its assessment of
the success of the impugned policy, but it must be given a
chance to combat the rise in alcohol.
32. In this analysis we are unable to find reason or·
E justification in accepting these Appeals. The impugned
Judgment is founded on the strength of previous decisions of
this Court. As we have already recorded, we had the great
pleasure of hearing extremely erudite arguments from the
F learned Senior Advocates for the Appellants. TheAppeals are
dismissed and the impugned Judgment is upheld. The parties
shall bear their respective costs.
Devika Gujral Appeals dismissed.
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