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Judgment
Yatindra Singh, J.—The main question involved in this case is whether or not the clubs serving liquor for price are covered by Section 277 of the Cantonment Act 2006 (Act No. 41 of 2006) (the Act) (See Appendix-I), Rule 325 of the UP Excise Manual (the Manual) (See Appendix-II), and Rule 2-A of the UP Number and Location of Excise Shop Rules, 1968 (the 1968 Rules) (See Appendix II).
THE FACTS
Prabhu Narain Union Club, Cantonment, Varanasi (the Club) is situate within the Cantonment area of the Cantonment Board, Varanasi (the Board). The Club was established in the year 1926 by His Excellency Maharaja of Banaras (Kashi Naresh). It is a society registered under the Societies Registration Act (for relevant part of its bye-laws and rules, see Appendix-III).
The total area of the club is 1.91 acres; it includes 0.61 acres for six lawn ennis Courts. The club also provides facility of playing Badminton. It has air conditioned Gymnasium, Billiards room, Family room, Bridge room, Card room, and Board room.
The Club has a kitchen which serves tea, coffee, snacks and sweets to the members and their guests. There is facility for serving lunch and dinner too.
The Club also started a oar in the year 1991 and obtained a license under U.P. Permit for Possession of Foreign Liquor by Club Rules 1980 (The 1980 Rules) (For relevant part of the Rules and conditions of the licence, see Appendix-IV). This license was renewed from time to time upto 31st March, 2006.
The Club filed an application on 21.2.2006 for renewal of its license. The District Excise Officer, Varanasi (DEO) required the petitioner to obtain consent/no objection certificate (NOC) from the Board under Rule 325 of the Manual (See Appendix-ll).
The DEO again by his letter dated 12.2.2007 insisted for obtaining NOC of the Board in view of the division bench decision of this Court reported in Bhanu Jaiswal v. State of UP 2006 (4) ALJ 147 (the Bhanu-Jaiswal Case).
The Club filed an application before the Board for grant of the NOC. The Executive Officer of the Board informed the petitioner by letters dated 28.9.2006 and 6.10.2006 that the Board has passed a resolution No. 25 dated 16.05.2006 (the Resolution), not to grant NOC/Approval/Permission for liquor vend shops in the Cantonment Area.
The Board in its letters dated 28.9.2006 and 6.10.2006 merely referred to the Resolution but did not say that the Club is covered by Section 277 of the Act or is a shop or sub-shop within the meaning of Rule 325 of the Manual or Rule 2A of the 1968 Rules. On the contrary, the Board wrote another letter dated 4.7.2007 that it is for the department to check whether license is required for running a club or not. This stalemate went on, leaving the petitioner without a licence. Hence, the present writ petition.
POINTS FOR DETERMINATION
We have heard Sri Pankaj Bhaita, counsel for the petitioner; Standing Counsel and Sri S.D. Dubey, for the respondents. Sri Bharatji Agarwal and Sri Shambhoo Chopra have also filed their written submissions as the friend of the Court. The following points arise for the determination in this case;
(i) Whether the Club is a shop or sub-shop within the meaning of Rule 325 of the Manual and Rule 2-A of the 1968 Rules
(ii) Whether the Bhanu-Jaiswal case is applicable to the Club.
(iii) Whether the Club is covered by Section 277(1)(j) of the Act and is required to take license from the Board.
(iv) In case the answer to the third point is in affirmative then, whether the Board is liable to grant NOC in view of Section 277(2) of the Act.
(v) Whether the Club is covered by the Resolution.
(vi) In case the answer to the fifth point is in affirmative then, whether the Resolution is invalid as,
(a) It does not fulfil the conditions mentioned in Section 277(2) of the Act.
(b) It does not achieve the object sought to be achieved-it does not bring about prohibition in the cantonment area.
(c) It is discriminatory-it discriminate between Army canteen, Defence Service Officers Institute (DSOI) and Army Mess on the one hand and civilian clubs, shops on the other.
POINTS 1 to 3: CLUBS ARE NOT COVERED Submission Of The Board
The counsel for the Board submits that:
(i) The Club serves liquor for price;
(ii) It is shop within the meaning of Rule 325 of the Manual as well as Rule 2-A of the 1968 Rules;
(iii) It can not run a bar without consent of the Officer commanding the station;
(iv) It is ''vendor of spirituous liquors'' within the meaning of Section 277(1) of the Act and it is required to take license from the Board.
The UP Excise Act, 1910 (the Excise Act) was enacted to consolidate and amend the law relating to import, export, transport, manufacture, sale and possession of intoxicant liquor and intoxicating drug: these activities can not be carried on unless requisite licence has been obtained under the Excise Act. Undoubtedly, the club can not serve liquor unless it has the requisite license under the Excise Act.
Rule 325 of the Manual and Rule 2-A of the 1968 Rules (see Appendix -II) apply to shops and sub-shops established under the Excise Act to sell intoxitant liquor and drugs. They empower the Collector to decide the number and location of shops and sub-shops, subject to the control of the State Government and the Excise Commissioner. Nevertheless they restrict the power of the Collector within the military cantonment; within this area, this power can be exercised only with the consent of the Officer commanding the station.
The Collector can not set up shops or sub-shops unless the consent of Officer commanding the station is obtained. This was held in the Bhanu-Jaiswal case. Neverthless, this case did not decide-whether a club is a shop or sub-shop within the meaning of these rules. This is what we have to decide in the present case.
Here, we will like to point out that the respondents themselves understood the law as there being no requirement for the clubs to obtain the consent of the Officer commanding the station or license from the Board before they serve liquor they never treated them as shops or sub-shops or vendors of spirituous liquor. This is clear from the following facts:
� Apart from Varanasi Cantonment, there are Clubs within the cantonment area at Agra, Kanpur Nagar, Lucknow and Meerut. No permission or NOC was ever required for such clubs prior to 2006-07.
� For the year 2006-07, the permission/licence is being required only within the Varansi cantonement Board Area. It was not asked for any club situate within the area of any other cantonment board.
� The Board is also unwilling to commit itself on the point whether the Club requires the NOC or not-it wrote a letter dated 4.7.2007 stating that it is for the excise department to decide whether the club requires a licence or not.
This is strange attitude on the part of the respondents-leaving no option for the Club but to resort to the litigation (see Appendix-V for some digression on ''UNNECESSARY LITIGATION AND GOOD ADMINISTRATION''). The question is-does the law require the clubs to obtain consent/license.
It is correct that the respondents are not estopped from insisting for obtaining the consent or license if the law so requires: the fact that it was not insisted earlier, or is not being insisted at present at other places, is irrelevant.
The executive may procrastinate; it may leave the matter undecided to avoid the blame. We can not leave it undecided; this is our duty. It has been said, ''Judges do not have an easy job. They repeatedly do what the rest of us seek to avoid: make decisions. They carry out this function in public'' (Judges by David Pannick). We have to take sides-the side that justice lies.
We must give reasons for the side that we take. In doing so, we ''must not spin a coin or consult an astrologer'' {Lord Diplock in (R V Deputy Industrial Injuries Commissioner Ex parte Moore (1965) 1 All E.R. 81: (1965) 1QB 450. Here are our reasons for holding that neither the consent of the Officer commanding the station nor the licence from the Board is necessary. But first, some words about nature of the clubs and in particular-the Club.
The Club Is Incorporated Members'' Club
Halsbury laws of England, 4th edition, Volume 6, paragraph 201) explains,
a club,...may be defined as a society of persons associated together, not for the purposes of trade, but for social reasons, the promotion of politics, sport, art, science or literature, or for any other lawful purpose; but trading activities will not destroy the nature of a club if they are merely incidental to the club''s purposes.
Clubs, generally have a test of membership-usually acceptability by existing members, who vote on admission. They may exclude or blackball the candidates.
Clubs can be classified according to the purpose for which they are founded. They can be Social clubs, Specialised clubs, Women''s clubs, Political clubs, Workingmen''s clubs, Shop clubs, School clubs, Professional clubs, Service clubs, Athletic and Sports clubs etc.
Legally, the clubs may be classified in two different ways:
� Members'' club and Proprietary club;
� Incorporated Club and Unincorporated club.
Members'' Club
A members'' club is an association of persons, who contribute towards the expenses of the association. The contribution is generally made by means of entrance fees or subscriptions, or both. It is not a partnership, because the members are not associated with a view of profit. The management of the club and its property is in the hands of the members. The business of the club is either conducted by them jointly in the general meeting or, as is usually the case, delegated to the committees in accordance with the rules.
Proprietary Club
A proprietary club is of different nature from a members'' club. In the proprietary club, the property and funds of the club belong to the proprietor, who usually conducts it with a view to profit. The members pay entrance fees and subscriptions to the proprietor and in consideration thereof are entitled to use the premises and property; they also exercise such other rights and privileges, as are envisaged in the contract between them and the proprietor. The management of a proprietary club may be given wholly or in part to a committee of the members over which the proprietor will usually have ultimate control.
Incorporated and Unincorporated Clubs
The other way to classify the clubs is as incorporated and unincorporated clubs. Members'' club or proprietary club could be either of them.
The word incorporated means a legal person, a legal entity; it includes a corporation, a registered company, a society registered under the Societies registration Act. However a partnership firm is not included: it is not a legal entity.
The Club is registered as a society under the Societies Registration Act: it is incorporated.
The relevant part of the Club''s bye laws and rules are appended as Appendix-Ill. They show that the purpose of the Club is to provide academic, social, and sports facility.
The bye-laws and rules of the Club also show that:
� Money generated by the Club from different sources has to be utilised for the purpose of the Club;
� No part of the same can be directly or indirectly transferred to its members. The members do not earn profit from its activities; there is no proprietor in the sense that any proprietary club has. The Club is not doing business or trade-it is not a proprietary club. The Club is incorporated members'' club.
The Club is not a Shop or Sub-shop
The Club provides different facilities to its members which include out-door as well as in-door sports activities; it serves food and beverages. Liquor is also served; it is a facility provided to the members and their guests.
The Club is incorporated members'' club. Such clubs are not liable for income tax on the ground of mutuality {See Commissioner of Income Tax v. Bankipur Club Ltd. 1997 ITR 97 and Chelnsford Club v. Commissioner of Income Tax Delhi : AIR2000SC1092 }. They are not trading or doing business.
Incorporated members clubs serve food, beverages, liquor etc. for a price. This was never treated to be sale and no sale tax was leviable (See The Joint Commercial Tax Officer, Harbour Division, II-Madras Vs. The Young Men''s Indian Association (Regd.), Madras and Others, . However, this is no longer the law due to addition of Sub-article 29-A in Article 366 of the Constitution by 46th Amendment Act 1982. This sub-article explains ''tax on the sale or purchase of the goods'' to include such supply of goods to its members. This kind of facility may now be sale for the purposes of the sales or trade tax however this does not mean that such clubs are doing trade or business of selling liquor or are vendors of spirituous liquor or are shops or sub-shops selling liquor.
Rule 2 of the 1980 Rules (See Appendix-IV) stipulates that liquor is for consumption of members and their bonafide guests in the premises of the Club only. This is also mentioned as special conditions in form FL 7-C (See Appendix-IV) under which licence is granted to the Club i.e. to say the liquor can not be taken by the members to their residence or to any other place: they have to consume it in the premises of the Club only. There is no such condition for the shops and sub-shops.
There is difference between shops, sub-shops on the one hand and the clubs on the other:
� The basic purpose of the shop or sub-shop is to do trade or business in liquor but this is not the case in the Club: it is not doing business or trade of selling liquor (see paragraph 20 and 30 of the judgement)
� In the shops or sub-shops, one purchases liquor and has right to take it to their residence or any where else. This is not permissible so far as the Club is concerned: the liquor has to be consumed in the premises of the Club. (See paragraph 34 of the judgement).
� The shops sell liquor in bottles but the clubs never serve or sell liquor in bottles but serve it as pegs for which price is charged
� In some shops (known as model shops), liquor can be consumed there but in these model shops too one can purchase liquor in bottles and can carry them to any other place. Their basic purpose is to sell and earn profit out of it. They trade or do business of selling liquor. They earn their livelihood by it. On the contrary, the members'' clubs are not formed to earn profit.
� The purpose of the Club is not to sell liquor; it is mentioned in the objects of the Club; it is to provide academic, social and sports facilities (see paragraph 29 of the judgement).
The Club is not a shop or sub-shop; it is not a place where trading or business is done.
The Bhanu-Jaiswal case was not case of a members'' club but was a case of a shop. It was covered by Rule 325 of the Manual as well as Rule 2-A of the 1968 Rules. The present case is of an incorporated members'' club; the facts of this case are different: it is not covered by the Bhanu-Jaiswal Case.
Section 277 of the Act - Not Applicable
Section 277 of the Act (See Appendix-I) mandates obtaining a licence from the Board for certain occupations. Section 277(1) enumerates classes of occupations which require a licence. It includes occupations specifically mentioned as well as such other trade, calling or occupation as the Central Government may notify. The counsel for the Board submitted that:
� Sub Section 227(1)(j) includes ''vendors of spirituous liquor''; and
� The Club is covered by it.
A reading of Section 277 of the Act indicates that this section is applicable where some trade or business in respect of classes mentioned in the section is being carried out. ''Club'' as a class is neither a occupation nor it is mentioned in Section 277 of the Act; incorporated members'' clubs neither trade nor do business of any class mentioned in Section 277 of the Act: they are not required to take license under the Act.
The Club is not doing any business or trade of selling spirituous liquor. It is an incorporated members'' club for social academic, and sport activities; it merely serves liquor as a facility or amenity; it is an incidental activity. The fact that money is charged for serving liquor does not mean that the Club is doing business or trade. It is not a ''vendor of spirituous liquor''.
POINTS IV TO VI: NOT DECIDED
In view of our decision on the first three points, it is not necessary to decide the remaining points.
A CLARIFICATION
The club is incorporated members'' club. It is not a proprietary club. We have considered the law only for such clubs. In case this question arises for any other kind of club then that question may be decided on its own merits.
CONCLUSIONS
Our conclusions are as follows:
(a) Parbhu Narain Union Club, cantonment, Varanasi is incorporated members'' club having its purpose as providing academic, social and sports activities. It is not doing any trade, business, calling or occupation;
(b) Incorporated members'' clubs are not covered by the Rule 325 of the UP Excise Manual or Rule 2-A of the UP Number and Location of Excise Shop Rules, 1968 or Section 277(1) of the Cantonments Act, 2006;
(c) The Bhanu-Jaiswal case is applicable to shops and sub-shops; it is not applicable to the incorporated members'' clubs;
(d) While considering grant of license to serve liquor in the members'' club neither the Collector nor such clubs are required to take consent of the Officer commanding the station;
(e) The incorporated members'' clubs are also not required to obtain any permission/license/no objection certificate from the Cantonment Board before serving liquor to its members and their guests.
ORDER
In view of our conclusions, the writ petition is allowed.
The District Excise Officer may consider grant of licence to the petitioner without insisting consent of the Officer commanding the station or a no objection certificate/license from the Cantonment Board.