HIP BAR PVT. LTD. Vs. STATE OF KARNATAKA

JUDGEMENT

(1.) The petitioner is a Company incorporated under the Companies Act, 2013, said to have been offering a Semi-Closed Prepaid Payment Instrument(Mobile Wallet) to its customers among other services. It is contended that the Reserve Bank of India (RBI) has issued a certificate of Authorization to the petitioner for operation of Semi- Closed Prepaid Payment Instruments (Mobile Wallet) under the Payment and Settlement Systems Act, 2007 ('PSS Act' for short), which is valid till 30th September, 2021; licence under the Food & Safety Standards Act, 2006 ('FSS Act' for short) is said to have been granted to carry on food business. The licence issued by the Government of Karnataka under FSS Act provides to carry on the business of distributor, supplier, transporter, wherein the petitioner is permitted to carry on food business relating to (1) Ready-to-eat savouries; (2) Beverages, excluding dairy products. It is contended that on the request made by the petitioner highlighting the Digital Wallet Technology of the Company exclusively meant for the adult beverages industry, a cashless transaction seeking support for the digital initiative, Letter of Authority dated 01.08.2017 was issued by the respondent for Online Order Processing and Delivery of Indian and Foreign Liquor including Beer, Wine and LAB (Low Alcoholic Beverages) by the petitioner - Hip Bar with certain conditions. It is alleged that pursuant to the coverage against the petitioner executed by a Kannada News TV Channel, the said Letter of Authority was withdrawn abruptly sans providing an opportunity to show cause. Further, the petitioner was compelled by the respondent to give an affidavit dated 15.11.2018 stating that it has disabled the online delivery of liquor, without prejudice to its rights. Being aggrieved by the aforesaid action of the respondent, petitioner is before this Court seeking for the following reliefs:-

(2.) Learned Senior counsel Sri. P. Chidambaram representing the learned counsel for the petitioner has mainly raised three grounds. Firstly, cancellation of Letter of Authority without issuing show-cause notice is against the principles of natural justice and is void ab initio. Secondly, no Letter of Authority was required for carrying on the business under the provisions of PSS Act and RBI Regulations. Indeed, no application has been filed by the petitioner for grant of Letter of Authority. Letter of Authority, if any issued has no effect in the eye of law. Thirdly, it was submitted that the action of the respondent - Authority interfering with the business transaction of the petitioner is wholly arbitrary and in breach of the fundamental rights guaranteed under Articles 14 and 19(1)(g) of the Constitution of India. Neither sale of liquor is totally prohibited nor monopoly is taken by the State in the State of Karnataka.

(3.) Elaborating the arguments on these points, it was submitted that the petitioner has not violated any provisions of the Karnataka Excise Act, 1965 ('Act, 1965' for short) or the conditions prescribed in the Letter of Authority issued. In terms of Sections 13, 14 and 15 of the Act 1965, licence is necessary for manufacture, possession and sale of liquor. But the petitioner is not engaged in any of these activities. On the other hand, the petitioner is acting as a facilitator for the sale of liquor by the merchant (licensee) to the consumer (purchaser) through the Digital Wallet.