Supreme Court upholds Kerala law which allows liquor bars only in 5-star hotels [Read Judgment]

                        IN THE SUPREME COURT OF INDIA
                        CIVIL APPELLATE JURISDICTION
                        CIVIL APPEAL NO. 4157 OF 2015
STATE OF KERALA & ORS.                          .. RESPONDENTS
[C.A. NO. 4119/2015, C.A. NO. 4120/2015,
C.A. NO. 4121/2015, C.A. NO. 4122/2015,
C.A. NO. 4123/2015, C.A. NO. 4124/2015,
C.A. NO. 4125/2015, C.A. NO. 4126-4136/2015,
C.A. NO. 4137-4156/2015, C.A. NO. 4158-4159/2015, C.A. NO.  4160/2015,  C.A.
NO. 4161-4165/2015,
C.A. NO. 4166/2015, C.A. NO. 4167/2015,
C.A. NO. 4168/2015, C.A. NO. 4169/2015,
C.A. NO. 4170/2015, C.A. NO. 4171/2015,
C.A. NO. 4172/2015, C.A. NO. 4173/2015,
C.A. NO. 4174/2015, C.A. NO. 4175/2015,
C.A. NO. 4999/2015, C.A. NO. 5000/2015,
C.A. NO. 5374/2015, C.A. NO. 4998/2015,
C.A. NO. 5375/2015, C.A. NO. 5032/2015,
C.A. NO. 5373/2015, C.A. NO. 6268/2015,
C.A. NO. 5791/2015, C.A. NO. 5372/2015,
C.A. NO. 5792/2015, C.A. NO. 5793/2015,
C.A. NO. 5797/2015, C.A. NO. 5799/2015,
C.A. NO. 5800/2015, C.A. NO. 5801-5803/2015,
C.A. NO. 6271/2015, C.A. NO. 6272/2015,
C.A. NO. 6269/2015, C.A. NO. 5790/2015,
C.A. NO. 4118/2015, C.A. NO. 6273-6274/2015 and C.A. NO. 6324/2015]

                               J U D G M E N T

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
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 2014-15 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  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.
2     The Abkari Act, 1077 was introduced in the erstwhile State  of  Cochin
in 1902 and came to be extended throughout the  State  of  Kerala  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). As at present, the private sector is not  permitted  to  manufacture
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 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  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 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 alcohol in  public  may
have  the  effect  of  bringing  down  and  arresting  the  ever  escalating
addiction to  liquor.   But  we  must  immediately  record  our  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  this
pernicious  habit  is  to  be  combated,  there  seems  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 the consumption of hard liquor,  and  indeed  is  a
social  malaise  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;  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  had  upheld  that  policy.
Obviously  encouraged  by  this  success,  the  State  of  Kerala  in   2011
introduced further amendments 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  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, 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 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  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:

The Government being convinced the fact that in order 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.
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 renew the licenses  of  418
non standard bar hotels mentioned in the Judgment of the Supreme Court.
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
2nd October, 2014 onwards.
The sale of high strength alcoholic  liquor  through  Beverages  Corporation
will be gradually reduced.
In order to rehabilitate the  employees  who  lose  their  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.
The Liquor-Free propaganda program will be strengthened in  the  society  at
large and especially in educational institutions.
All Sundays will be declared as  dry-day.   This  will  implement  from  the
Sunday of 5th October, 2014.
The traditional toddy tapping business will be protected  and  job  security
will be ensured for toddy tappers.
In order to  rehabilitate  the  employees  of  closing  bars  and  employees
engaged in the job of affixing stickers, measures will be  adopted.   Kerala
Alcohol Education Research,  Rehabilitation  &  Compensation  Fund  (KAERCF)
Fund will be 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  destroyed  themselves   by   alcohol
consumption, rehabilitation of the persons who lost job.  The fund for  this
purpose will also be found out from public.
To implement the order urgently, the Excise 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

5     The first paragraph of sub-rule (3) of Rule 13 was substituted by  way
of G.O.(P) No. 141/2014 and now reads as follows:

“(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 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
[pic]23,00,000 (Rupees Twenty-three lakhs only).   However, no such  license
shall be issued to hotels if located within 200 (two  Hundred)  metres  from
any 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  of
license, the arrears of contributions if any payable up to the 31st  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  temporarily  from
1st  April,  2014,  other  than  those  of  the  hotels  having  Five   Star
classifications shall be cancelled.”

6      Litigation pertaining to or challenging liquor policies is legion  in
our land.  In his inimitable style Justice V.R. Krishna 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 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(f)(v) and Rule 37 of the Punjab Excise Act and Liquor  Licence
(Second Amendment) Rules, (hereinafter, for 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 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!

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

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 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 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 the said right, in public interest”.
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,  along  with  decisions
which had 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.
(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  said  qualifications.  Even  the  rights  guaranteed
under the Constitutions of the other civilized 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
(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  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  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 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 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  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 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 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.
(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 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 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 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 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 has the right to carry on trade or  business
subject  to  the  limitations,  if  any,   and   the   State   cannot   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 maximise its revenue so long as the  method  adopted
is not discriminatory.
(i)    The  State  can  carry  on  trade  or  business  in  potable   liquor
notwithstanding that it is an intoxicating 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 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  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  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  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  protection  of
equal laws, that is, laws that operate  alike  on  all  persons  under  like
 (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 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
(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 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.
(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
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  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 on a particular  subject.  This  power,  no
doubt, in some degree is likely to produce some inequality;  but  if  a  law
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   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 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 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
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  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.  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 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  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
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  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
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
(10) Whether a law conferring  discretionary  powers  on  an  administrative
authority is constitutionally valid or not 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 because  of  such  an
apprehension.  Discretionary  power  is  not  necessarily  a  discriminatory
(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 essence of a classification that upon  the  class  are
cast 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.

10    It would now be apposite to discuss both  B.Six  Hotels  and  Surendra
Das in some detail.  In B.Six Hotels, the Applicant’s application for an FL-
3 license was rejected 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 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 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 manufacture and  sale  of  liquor,  and  no
citizen has a fundamental right to carry on trade  or  business  in  liquor,
the applicant did not have a vested right to get a licence. Where  there  is
no  vested  right,  the  application  for  licence  requires   verification,
inspection and processing. In such circumstances it has to be held that  the
consideration of application of FL-3 licence should be only  with  reference
to the rules/law prevailing or in force on the date of consideration of  the
application by the excise authorities, with reference to the law and not  as
on the date of application.”  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 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 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  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 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 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  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  bar  license.  However,
this finding was clearly obiter and must be treated as  such.  The  Distance
Rule was struck down, with 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 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  47.  The  limitation  of
fresh 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 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 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 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 citizen has the right not to be discriminated  against.  Any
regulatory 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 Abkari Act as  it  aims  at  bringing
about prohibition. It was also 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  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  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 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  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)  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 Government did not even state  the  reasons  for
rejecting the 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.

13    This decision was set aside  by  the  Division  Bench  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  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 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 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 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  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 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  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  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.

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, 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 mala 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.  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  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 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 the face of the current ground reality, even  a  policy  which
achieves only a partial reduction in the amount of alcohol 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. 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 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.  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 in Five Star hotels.
                 2010-2011            2011-2012                2012-2013
|Category     |Value  |%      |Value in|%      |Value in|%         |
|             |in     |       |Crores  |       |Crores  |          |
|             |Crores |       |        |       |        |          |
|5 Star       |2.25   |0.04   |9.18    |0.13   |6.32    |0.08      |
|4 Star       |13.58  |0.21   |15.81   |0.22   |33.26   |0.4       |
|3 Star       |448.71 |7.09   |539.12  |7.35   |644.19  |7.76      |
|2 Star       |150.31 |2.38   |171.63  |2.34   |195.73  |2.36      |
|UN STARRED   |854.8  |13.5   |955.39  |13.03  |1126.23 |13.56     |
|FL-1 SHOPS   |4823   |76.21  |5612    |76.53  |6260    |75.39     |
|HERITAGE     |4.93   |0.08   |8.04    | 0.11  |12.34   |0.15      |
|CLASSIFIED   |29.89  |0.47   |19.77   |0.27   |24.55   |0.29      |
|TOTAL        |6328.75|100    |7332.13 |100    |8303.65 |100       |

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

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 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, 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 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  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 Article 14  have
been violated. It is  trite  law  that  Article  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  that  there  is  no
intelligible differentia in the creation of classes,  on  their  predication
that Four Star and Five Star hotels form one homogenous class. It  has  been
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 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  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  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 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 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  by  an  Act,  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  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 SCC  787,  when  discrimination  is
based on class, it is more pernicious and needs careful judicial enquiry.

18     The  Appellants  before  us  have  also  argued  that   the   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 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, 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 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  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 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 license, the chance of reissuance is a consideration. The procedure for  a
renewal and for a fresh application are different. More  significantly,  the
State, before this Court in  Surendra  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,  i.e.  the  Respondent  State,
since a prima facie case of discrimination is made out.

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  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 Star hotels was not in issue and  therefore  this
issue is at large.  In fact, in the 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 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 this would amount to a classification  without  reasonable
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 umbrella of “public place”. It did not create a class in any  way.

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 reduce the public consumption of  liquor.  An  exception
was 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 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 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 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  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 in  the  business  of  liquor,  which  is  res  extra
commercium. 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  trade.  Finally,  it  was   submitted   that
constitutionality is presumed, so the burden  of  proof  is  on  the  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  Sundaram,  has  sought  to
argue that a right under Article 19(1)(g) exists in the business of  liquor.
In his detailed elucidation of the decision  in  Khoday,  he  has  contended
that 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 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  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  includes
the power to carry on such trade to 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 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  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.

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  the
other citizens. He cannot  claim  equal  right  to  carry  on  the  business
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 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  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 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 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  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  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 Respondents that there  is  no
right  to  trade  in  liquor  because  it  is  res  extra  commercium.   The
interpretation of Khoday put 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 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  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, in  Khoday,
the concept of res extra commercium came to 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  transact  this
business.    History  has  painstakingly  made  it  abundantly  clear   that
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 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,  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 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  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  inebriants  cannot  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.  Banning public consumption of  alcohol,  therefore,  in
our considered opinion, cannot but  be  seen  as  a  positive  step  towards
bringing down the consumption of alcohol, or as preparatory to prohibition.

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 meet the tests  of  this
Article,  i.e.  the  right  to  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 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 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,  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.  There was also a challenge to the distance criteria prescribed  by
the State.  All these grounds of assailment did not find  favour  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
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. 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.    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 public places  is
not 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. At this juncture, it is nobody’s case that  some
hotels ought 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.  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 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 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 are of a mature age; they do not visit  these  hotels  with  the
sole purpose of consuming alcohol.  Learned Senior  Counsel  for  the  State
Mr. Sibal has taken us at  great  length  through  the  One  Man  Commission
Report to establish that  the  State  duly  considered  the  recommendations
therein and incorporated a 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.

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 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.

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  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
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.   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 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  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 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.
 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 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 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  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 hotels and below has  been
repulsed by this Court and  we  see  no  reason  to  depart  from  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 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
Government aware of its folly.  As was recently held by a Three-judge  bench
of this Court in Census Commissioner v. R. Krishnamurthy (2015) 2 SCC 796:

From the aforesaid pronouncement of law, it is clear as 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  reasons  or  totally
arbitrary  and  founded  ipse  dixit  offending  the  basic  requirement  of
Article 14 of the Constitution. In certain matters,  as  often  said,  there
can be opinions and opinions but the Court is not  expected  to  sit  as  an
appellate authority on an opinion.

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 circumstances, it is  not  for  the  Appellants  to
argue or for us to hold that the goal of prohibition would  be  more  likely
to be met 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 affects some vested interests, and the Court may not  strike  down
a policy “at the behest 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.”

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  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 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 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  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 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
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 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, but there is no doubt that  these  workers
do have a right to be 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  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  learned
Senior Advocates for the Appellants.  The  Appeals  are  dismissed  and  the
impugned Judgment is  upheld.   The  parties  shall  bear  their  respective

                                             [VIKRAMAJIT SEN]

                                             [SHIVA KIRTI SINGH]
New Delhi;
December 29, 2015.

Leave a Reply

Your email address will not be published. Required fields are marked *