IMPORTANT POINT
The court ruled that penalties under Section 67 of the Abkari Act cannot be imposed for changes in a company's Board of Directors without a change in ownership or alteration of foundational documents.

JUDGMENT :

[30519/2024]

Heard Mr E K Nandakumar (Sr) assisted by Ms Akhila Nambiar, Mr M Krishnakumar, Mr Jawahar Jose, Mr Raju K Mathews, Mr N Raghuraj (Sr) assisted by Mr Vivek Menon, Mr Tom Thomas, Mr Joseph Markos (Sr) assisted by Mr Abraham Joseph Markos, Mr M G Karthikeyan, Mr Saiby Jose Kidangoor, Mr Millu Dandapani learned Counsel for the petitioners, and Mr V Manu learned Special Government Pleader to the Advocate General.

2. The petitioners in this batch of writ petitions are private limited companies, except for United Breweries Limited, United Spirits Ltd, and the Lalit Resort and Spa, Bekal, which is owned by M/s Bharath Hotels Limited, which are listed public companies. The petitioner - Janatha Tourist Home, is run by a partnership firm, and the partners are the family members, M/s Kannur Surya Residency is run by a Limited Liability Partnership. The petitioners are either distilleries/breweries having licenses under the Brewery Rules 1967 and Kerala Distillery and Warehouse Rules 1968 or hotels/resorts having FL-3 licenses for the bars attached to the hotels/resorts. The petitioners are aggrieved by the orders passed by the Excise Commissioner imposing penalty purportedly under Sections 67(1) and (2) of the Abkari Act.

2.1 Almost common questions of law and facts are involved in these writ petitions. Therefore, these writ petitions are being decided by this common judgment.

Facts and Petitioners’ submission:

W.P.(C) No.35003/2023 – United Breweries Limited

3. The petitioner is a listed public company primarily engaged in the business of brewing, manufacturing and selling beer. The petitioner is a licensee under the Brewery Rules, 1967. The Brewery is situated in Kanjikode, Palakkad District, State of Kerala.

3.1 The petitioner has challenged the order dated 26.09.2023 imposing a penalty of Rs.30 lakhs by the Excise Commissioner under Section 67(1) and (2) of the Abkari Act, on the ground that the petitioner had ‘reconstituted its Director Board’ without prior permission from the Excise Commissioner. Therefore, the petitioner had acted in violation of the provisions of Sections 67 (1) and (2) of the Abkari Act. The petitioner has also prayed for the quashing of the demand notices in pursuance of the penalty order.

3.2 The contentions raised on behalf of the petitioners are that Section 67(3) of the Abkari Act is inapplicable to the petitioner as the petitioner is a licensed ‘Brewery’ and does not have any hotel or restaurant holding a license under the Abkari Act. The petitioner is a licensee under the Brewery Rules 1967, and the Brewery Rules do not contain any restrictions or constraints insofar as the ‘reconstitution of the Director Board’ is concerned. The jurisdictional fact necessary for imposing the penalty on the petitioner under Section 67 of the Abkari Act, the ‘contravention of any Rule’ by a person holding a license or permit issued under the Abkari Act is absent in the case.

3.3 It is not the case of the respondents that the petitioner has contravened any Rule(s) under the Abkari Act or the Brewery Rules 1967. Therefore, without there being present a jurisdictional fact necessary for imposing any penalty on the petitioner, the order impugned is unsustainable and liable to be quashed. It is further submitted that imposing the penalty under Section 67(2) of the Abkari Act is wholly unjustified inasmuch as the petitioner holds the license for manufacture etc, under the Brewery Rules 1967 and not on the strength of any ‘deed’ as described under Section 67(2) of the Abkari Act. Even if it is assumed that the Memorandum of Association (MoA)/Articles of Association (AoA) of the petitioner could be termed a ‘deed’ for the purposes of Section 67(2), a change in the composition of the Board of Directors would not amount to reconstitution/alteration/modification of the MoA or AoA of the petitioner.

3.4 Furthermore, the Division Bench judgment of this Court in State of Kerala v. Panamoottil Investments, (2010) 1 KLT 557 re