No Online Liquor Sale Permissible When Excise Rules Do Not Allow It : Karnataka High Court

The ban on online sale of liquor will continue in the State of Karnataka. On Thursday the Karnataka High Court dismissed an appeal filed by 'HIP Bar Private Limited' which challenged the order of the single judge bench which had refused to declare that the company can do business of Online Order processing and Delivery of Indian and Foreign Liquor including Beer, Wine and Low Alcoholic Beverages ("LAB"). A division bench of Justice Satish Chandra Sharma and Justice V Srishananda while dismissing the appeal said "The licence issued under the Excise Act and the Rules framed thereunder in no way authorizes any agent/intermediary to transport the liquor and under Rule 3 of the sale of Indian and Foreign liquor Rules, 1968 only CL-2 and CL -11(c) licensees are entitled to vend licence to public in retail. It is only a take away transaction in a sealed bottle for MRP from shop premises."Case background: The company was offering a Semi-Closed Prepaid Payment Instrument (Mobile Wallet) to its customers among other services. The Reserve Bank of India (RBI) had issued a certificate of Authorization to the petitioner for operation, under the Payment and Settlement Systems Act, 2007, which is valid till September 30, 2021. The licence issued by the Government of Karnataka enabled it to carry on the business of distributor, supplier, transporter, wherein the petitioner is permitted to carry on food business relating to Ready-to-eat savouries; Beverages, excluding dairy products. On August 1, 2017, Letter of Authority was issued by the respondent for Online Order Processing and Delivery of Indian and Foreign Liquor including Beer, Wine and LAB (Low Alcoholic Beverages) to – Hip Bar with certain conditions. Allegedly pursuant to news reports the LOA was withdrawn abruptly without providing an opportunity to show cause. Petitioner was compelled by the respondent to give an affidavit stating that it has disabled the online delivery of liquor, without prejudice to its rights. Being aggrieved, the company moved the high court seeking declaration that it does not does not require any license or permission to conduct business of Online Order processing and Delivery of Indian and Foreign Liquor including Beer, Wine and Low Alcoholic Beverages ("LAB"). A Single Judge bench S Sujatha on September 18, 2019 dismissed the petition filed by the company holding that online sale of liquor cannot be allowed in the absence of enabling provisions under the Karnataka Excise Act to grant such licenses or permissions. Following which the company filed an appeal. Contentions of the appellant: Relying on the judgment in the case of Sodexo SVC India Private Limited v. State of Maharashtra and others (2015) 16 SCC 479, contended that company is also entitled to deliver liquor to the purchaser as it is simply acting as a facilitator and the medium between the affiliates and the consumers. Further, reliance was placed on the judgment in the case of Kerala Bar Hotels Association and another vs. State of Kerala and others, (2015) 16 SCC 421 and argued that the right to trade any liquor is a right guaranteed under Article 19(1) of the Constitution of India. It was also contended that the order passed by the Excise Commissioner withdrawing LOA is violative under Article 19(1)(g) and the impugned order shows non-application of the mind. Moreover, the company raised a ground of violation of principles of natural justice and fair play. In so far as the LOA was withdrawn without following principles of natural justice and fair play. No show cause notice was issued at any point of time. Submission of the state : It was submitted that the petitioner has no fundamental right to trade in liquor. Entry 8 of List II Schedule VII of the Constitution empowers the State Government to legislate with regard to intoxicating liquors i.e., production, manufacture, possession, transport, purchase and sale of intoxicating liquors and Entry 51 empowers the State legislature to levy duties of Excise and countervailing duties and under Entry 8, there may be an absolute prohibition of sale of liquor. A citizen has no fundamental right to carry on trade or business in liquors. The state also contended that petitioner does not have licence granted by the RBI for sale and purchase of the liquor and the contention of the petitioner that it is only a facilitator and delivering liquor in respect of the purchase which has taken place at the shop itself is not correct. "Initially a letter of authority (LOA) issued to the petitioner for processing online order and delivery was only on a trial and experimental basis, he was operating only in Bengaluru BBMP limits. The Excise Department at some point of time felt that the same was not adaptable due to the huge objections from existing licensed stakeholders and media buzz on social...

No Online Liquor Sale Permissible When Excise Rules Do Not Allow It : Karnataka High Court

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