ALLAHABAD HIGH COURT HOLDS POWER TO CANCEL SECOND LIQUOR LICENCE UNDER SECTION 34(2) U.P. EXCISE ACT IS DISCRETIONARY, NOT MANDATORY:

The Allahabad High Court has ruled that cancellation of a separate liquor licence cannot be done mechanically under Section 34(2) of the U.P. Excise Act merely because another licence held by the same licensee has been cancelled. The Court clarified that the power under Section 34(2) is discretionary in nature and not mandatory. It further held that blacklisting orders, which carry serious civil consequences affecting a person’s business reputation and livelihood, cannot be imposed for an indefinite or unspecified period.

Justice Piyush Agrawal delivered the judgment while partly allowing a writ petition filed by an excise licence holder challenging the cancellation of his country liquor retail licence at Village Maukhas, Meerut, and his indefinite blacklisting by the licensing authorities. The petitioner had been granted licences to operate country liquor shops at Village Parikshitgarh and Village Maukhas in Meerut, which were renewed for the excise year 2020-21. During the COVID-19 lockdown, an FIR was registered against the petitioner under various sections of the IPC, the Epidemic Diseases Act, and the U.P. Excise Act, alleging that he was transporting 10 cartons of liquor in a white Scorpio car. The vehicle belonged to a local police constable, but no proceedings were initiated against the vehicle owner.

Subsequently, a show cause notice was issued concerning the Maukhas shop. The Licensing Authority cancelled the licence, forfeited the entire licence fee and security deposit, and blacklisted the petitioner for an indefinite period. Before the Court, the petitioner did not press for restoration of the cancelled licence but challenged the mechanical invocation of Section 34(2) of the U.P. Excise Act. He contended that there was no independent violation relating to the Maukhas shop and that its cancellation was solely based on the cancellation of the other licence without assigning any specific reasons.

The State opposed the petition on the ground of maintainability, arguing that the petitioner had an efficacious alternative remedy of filing a revision under Section 11(2) of the U.P. Excise Act. The Court rejected this preliminary objection. It observed that a writ petition remains maintainable when it raises pure questions of law and does not require investigation into disputed facts. In the present case, only pure questions of law were involved regarding the discretionary nature of power under Section 34(2) and the legality of indefinite blacklisting. Therefore, the High Court could entertain the writ petition in its discretion even though the alternative remedy was not exhausted.

On the merits, the Court held that authorities exercising powers under Section 34(2) of the U.P. Excise Act are required to independently assess whether continuation of the second licence would be detrimental to the interest of the revenue. They cannot cancel a separate licence mechanically by merely referring to the section and the relevant rule without recording independent findings of fact. The authorities must apply their mind judicially and demonstrate how permitting the licensee to continue with the second shop would harm revenue interests. In the instant case, neither the show cause notice nor the cancellation order contained any such finding. The Court also noted that no action had been taken against the police constable who owned the vehicle in question, which cast doubt on the bona fides of the proceedings.

Regarding blacklisting, the Court emphasised that such orders have serious civil consequences and must not be passed for an indefinite period. Relying on Supreme Court decisions in Kulja Industries Limited v. Chief General Manager, Western Telecom Project, BSNL (2014) 14 SCC 731 and Daffodills Pharmaceuticals Limited v. State of U.P. (2020) 18 SCC 550, the Bench held that blacklisting for an unspecified duration is contrary to settled law.

The Court further rejected the objection of delay in filing the writ petition, observing that delay by itself does not defeat the writ jurisdiction, especially when no third-party rights have crystallised and the challenge is directed against the legality of State action. Since the relevant excise year had already expired, the petitioner could not claim continuation of the licence. However, the Court observed that if the petitioner applies under any new excise policy and succeeds, the forfeited amount may be adjusted in accordance with the rules. The writ petition was partly allowed. The cancellation order and the blacklisting were set aside to the extent they were passed mechanically under Section 34(2) and for an indefinite period.