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REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4157 OF 2015

THE KERALA BAR HOTELS ASSOCIATION & ANR.  .. APPELLANTS

VERSUS

STATE OF KERALA & ORS.               .. RESPONDENTS

WITH

[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]

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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

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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

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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

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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:

7. 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.

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 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 2nd October, 2014 onwards.

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 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.

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 implement from the Sunday of 5th October, 2014.

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7. The traditional  toddy tapping business  will  be protected and job security will be ensured for toddy tappers.

8. 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.

9. 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

    Secretary

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  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:

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“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 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 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

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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 Constitution.

(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,

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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

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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 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 to attain particular ends in giving

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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.

(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

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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 applied.

(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 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 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.

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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

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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

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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

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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

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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

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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

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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

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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.

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    2010-2011            2011-2012                2012-2013 Category Value

in Crores

% Value in

Crores

% Value in

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 13.0 3

1126.23 13.56

FL-1 SHOPS 4823 76.2 1  

5612 76.5 3

6260 75.39

HERITAGE 4.93 0.08 8.04  0.11 12.34 0.15 CLASSIFIE D

29.89 0.47 19.77 0.27 24.55 0.29

TOTAL 6328.7 5

100 7332.1 3

100 8303.6 5

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 reference:

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

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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

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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.

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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

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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.

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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

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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

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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

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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

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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

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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

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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

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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.

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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.

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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

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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

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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

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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

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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 costs.

…………………………J [VIKRAMAJIT SEN]

…………………………J [SHIVA KIRTI SINGH]

New Delhi; December 29, 2015.