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Judgment
T.R. Ramachandran Nair, J.—This writ petition concerns a controversy regarding the renewal of FL.3 licence sought for by the Petitioner, which is a Private Limited Company. This writ petition is filed by the Company represented by its Managing Director.
Heard Shri George Thomas Mevada learned Senior Counsel appearing for the Petitioner, Shri Raju Joseph learned Senior Counsel appearing for the fifth Respondent, Shri Devan Ramachandran learned Counsel appearing for the fourth Respondent, the learned Government Pleader appearing for Respondent Nos. 1 to 3 and Shri K.P. Satheesan appearing for the Company in the connected W.P.(C). No. 29642/2009.
The hotel owned by the Company is situated at Payyannur having ''3 Star'' category certification by the Department of Tourism which was granted on 18/06/2001 and it was renewed from time to time.
FL.3 licence granted to the Petitioner was renewed upto 31/03/2010 as evidenced by Ext.P1. There had been transfer of shares during 2007-08. According to the Petitioner, the request for the transfer of shares was allowed at the meeting of the Board of Directors on 08/07/2008. The fourth Respondent, according to the Petitioner, a former Shareholder had raised a complaint before the first Respondent alleging that the Petitioner''s hotel is not provided with star classification and, therefore, FL.3 licence may not be renewed in future. He filed W.P.(C). No. 5988/2010 wherein this Court directed the first Respondent to dispose of the representation which culminated in the first Respondent issuing Ext.P5 order which is mainly under challenge in this writ petition.
The application Ext.P10 is one filed before the Deputy Commissioner of Excise after remitting licence fee of Rs. 22.25 lakhs for the year 2010-11.
The learned Senior Counsel for the Petitioner submitted that the company had approached this Court by filing W.P.(c). No. 25700/2010 wherein this Court directed the first Respondent therein to issue reclassification certificate based on the recommendations of the competent authority within seven days from the date of receipt of the copy of the Judgment. The third Respondent therein was the Petitioner in W.P.(C). No. 15505/2010. Both writ petitions were heard together. The objection raised by the third Respondent in the said writ petition was that the then Managing Director has no entitlement to apply for classification as he had no ownership right or lease hold right over the hotel building. The said writ petition was dismissed. It is pointed out that the fourth Respondent has raised certain disputes with regard to the transfer of shares and he has also approached this Court by filing W.P.(c). No. 12729/2010 which is pending. Ext.P4 is an order passed by the Government rejecting his revision petition, challenging the sanction given for reconstitution of the Board of Directors whereby fifth Respondent became the Managing Director. The dispute therein was regarding reconstitution of the Board of Directors of the Company. Exts.P7 and P8 are the communication issued by Department of Tourism & Promotion granting 3 Star classification for five years.
According to the learned Senior Counsel for the Petitioner any dispute with regard to the person who could represent the company as Managing Director need not deter the first Respondent from considering the application for renewal of FL.3 licence. Conduct of business will enure to the benefit of the company -a body corporate-and if FL.3 licence is not renewed, it will affect the affairs of the company and any dispute with regard to the alleged non payment of purchase price on transfer of shares and similar monetary disputes need not result in postponement of renewal of FL.3 licence. In that regard my attention was invited to the judgment of the Division Bench produced as Ext.R4(c) in W.A. No. 1780/2010 which was filed against the directions issued by the learned Single Judge in Ext.P7 Judgment. The Division Bench in paragraph (6) took the view that "the directions issued enures to the benefit of the Company - a body corporate". It is therefore submitted that Ext.P5 order cannot be sustained, more so for want of jurisdiction.
Shri Raju Joseph, learned Senior Counsel appearing for the fifth Respondent submitted that the fifth Respondent was representing the company as the Managing Director by which Ext.P1 licence was transferred and he has a right to get it renewed. Sanction was obtained under the relevant Rules, namely, Rule 19(iii) of Foreign Liquor Rules for reconstitution at that point of time. There is no valid transfer of shares in favour of Mr. K.T. Mathew, the person claiming as Managing Director now. Therefore, he cannot hold himself out as the Managing Director of the company. Various averments have been made in the counter affidavit filed by the fifth Respondent. Therefore, the vehement argument raised by the learned Senior Counsel for the fifth Respondent is that the application filed by Mr. K.T. Mathew as the present Managing Director cannot be considered by the Excise Commissioner. He has only created certain documents to show transfer of shares and unless and until such disputes are resolved, he cannot represent the company in any legal proceedings. My attention was invited to the detailed averments in the counter affidavit filed by the fifth Respondent.
The learned Counsel for the fourth Respondent Shri Devan Ramachandran submitted that the fourth Respondent has already approached the Company Law Board by filing Ext.R4(a) petition wherein the Company Law Board has passed an interim order after finding that there is a prima facie case. The copy of the interim order has been produced as Ext.R4(b). It is therefore submitted that in the light of the interim order, the Board Meeting and General Meeting of the Company cannot be held without the leave of the Company Law Board. They cannot pass any resolution and, therefore they cannot have any right to seek the renewal of the FL.3 licence. There is no valid resolution accompanying Ext.P10 application. Various arguments have been raised by the learned Counsel pointing out that unless and until the Company Law Board takes a final decision in the matter, namely, with regard to the dispute whether the present Managing Director Mr. K.T. Mathew can represent the company and whether there had been proper transfer of shares, he cannot represent as Managing Director of the Company for enabling him to get renewal of the FL.3 licence. The learned Counsel also disputed the validity of transfer of shares claimed by the fifth Respondent. It is submitted that there is total manipulation of records by both these parties. The learned Counsel therefore prayed that the matter may be adjourned for awaiting a decision of the Company Law Board in the Company Petition, which was opposed by the learned Senior Counsel for the Petitioner by submitting that the petition before the Company Law Board does not have any impact on the issues concerning application for the renewal of FL.3 licence.
The learned Government Pleader by relying upon the counter affidavit filed by the second Respondent submitted that various disputes are pending with regard to the reconstitution of the Board of Directors and it is in that circumstances Ext.P5 order was passed by the Commissioner directing the Deputy Commissioner not to renew the FL.3 licence unless and until the issue is settled. It is also pointed out that thereafter the Managing Director and Directors of the company have been changed and the same is yet to be approved by the Excise Department.
Rule 19 of the Foreign Liquor Rules deals with the powers of the Commissioner with regard to the grant of approval for reconstitution of the Board of Directors of the Company. Rules 19(i) and (ii) reads as follows:
19(i) under no circumstances shall any licence obtained under this notification be sold, transferred or sub rented without the previous sanction of the Excise Commissioner.
19(ii) Reconstitution of partnership by addition or deletion of members or reconstitution of Directors in a Company resulting in change of ownership which owns/manages or operates any licence issued under this rule shall be deemed to be transfer of licence.
Ext.P1 shows that when the fifth Respondent was appointed as the Managing Director, the Excise Commissioner had granted sanction for reconstitution and the licence was transferred/renewed in the name of the fifth Respondent. Evidently, the renewal sought for by the Company now can be granted only after previous sanction is accorded for reconstitution of the Board of Directors. Even though the learned Senior Counsel for the fifth Respondent and the learned Counsel for the fourth Respondent submitted that any order passed by the Excise Commissioner at this stage with regard to the entitlement of the present Managing Director to move the application without waiting for the final decision of the Company Law Board will not be valid, it cannot be said that the Excise Commissioner has no role in the matter of sanction of reconstitution of the Board of Directors while considering the application for renewal of FL.3 licence. To that limited extent the applications will have to be considered by the Excise Commissioner as per the provisions of Rule 19 of the Rules. The said exercise was already undertaken before when Ext.P1 renewal was granted.
In Ext.P5, the Excise Commissioner has taken the view that no renewal can be granted unless the issue regarding balance payment with Mr. K.T. Mathew is settled. Even though the learned Senior Counsel for the Petitioner submitted that actually the Commissioner has no jurisdiction to pass such an order, as rightly pointed out by the learned Senior Counsel for the fifth Respondent, the powers of the Commissioner with regard to the approval of the reconstitution under the relevant Rules cannot be disputed. Ext.P5 has to be understood in that regard alone. But pending disputes between the parties with regard to the unpaid purchase money or like matters and other money claims need not deter the Excise Commissioner from taking a decision in the matter. Therefore, the interdiction in Ext.P5 that the Deputy Commissioner may not renew the FL.3 licence cannot be justified. No decision has been taken so far on Ext.P10, evidently, because of the pendency of the writ petition also. The Petitioner in Ext.P10 has also sought for approval of the reconstitution of the Board under Rule 19 of the Foreign Liquor Rules. In that view of the matter, the writ petition is disposed of in the following terms:
There will be a direction to the first Respondent to take a decision on Exts.P9 & P10 after hearing the Petitioner and Respondent Nos. 4 and 5 with regard to the applications Exts.P9 & P10 for renewing the FL.3 licence and for approving the reconstitution of the Board submitted by the present Managing Director. The same depends upon a decision on the plea for grant of approval for reconstitution of the Board of Directors of the Company under Rule 19 of the Rules. Appropriate orders on these matters will be passed after considering the pleas of the respective parties within a period of one month from the date of receipt of a copy of this Judgment. No costs.