Liquor Trade A Privilege, Cannot Be Projected As Fundamental Right: J&K High Court Upholds Cantt Board's Power To Levy Enhanced License Fee

A Division Bench comprising Justices Sanjeev Kumar and Sanjay Parihar upheld the authority of the Srinagar Cantonment Board to enhance license fees for liquor establishments, observing that such enhancement was not arbitrary or unreasonable.

These observations came in a Letters Patent Appeal filed by the Chief Executive Officer of the Cantonment Board challenging the order passed by the Single Judge in terms of which it had quashed the Board's decision to enhance the annual license fee for a liquor bar from ₹5,00,000 with 30% annual escalation, terming it arbitrary and violative of Section 277(4) of the Cantonment Act, 2006.

Rejecting the view taken by the Single bench the court observed,

“… The said view of the learned writ court is erroneous in law because the business of sale of wine cannot be treated at par with other categories of business of eatables. At the cost of repetition, the occupation undertaken by the respondent No. 1 does not stem-out of a fundamental right, but by way of a privilege so respondent No. 1 cannot claim any discrimination that he is being charged with more license fee as compared to other businesses/occupations operating in the cantonment area”

Background:

The dispute originated when M/s Highlander Bar and Restaurant, operating within the Cantonment area of Srinagar under a license granted by the Board, was directed to deposit ₹5,00,000 as annual license fee for the financial year 2021-22, with a provision for 30% annual increase thereafter. The bar owner challenged this decision, arguing that the enhancement was exorbitant, lacked any rational objective, and contravened the mandate of Section 277(4) of the Cantonment Act, 2006. It was also submitted that such an increase was arbitrary and discriminatory under Article 14 of the Constitution, especially since the Srinagar Municipal Corporation was reportedly charging only ₹30,000 for similar licenses.

The Single Judge accepted these contentions and quashed the Board's letter and meeting minutes that formed the basis of the fee enhancement. However, in appeal, the Division Bench reversed that ruling.

Court's Observations:

Justice Sanjay Parihar, delivering the judgment for the Bench, observed that the right to carry on business in liquor is not a fundamental right. Citing Khoday Distilleries Ltd. v. State of Karnataka [(1995) 1 SCC 574], the Court reaffirmed that trade in intoxicating liquors is res extra commercium (outside the realm of commerce) and can be completely prohibited or regulated by the State. The Court elaborated,

“The right to practice any profession or to carry on any occupation, trade or business does not extend to practicing a profession or carrying on an occupation, trade or business which is inherently vicious and pernicious, and is condemned by all civilized societies… Potable liquor as a beverage is an intoxicating and depressant drink which is dangerous and injurious to health and is, therefore, an article which is res extra commercium.”

The Court emphasized that Article 47 of the Constitution, being a Directive Principle, obligates the State to work towards prohibition of intoxicating drinks except for medicinal purposes. Thus, any trade in liquor is not a matter of right but a regulated activity, the bench underscored.

Turning to the legality of the enhanced license fee, the Court analyzed the powers vested under Section 277(4) of the Cantonment Act, which permits Boards to fix “reasonable fee” keeping in view the license fee charged in municipalities in the same State. It held that while the fee should be reasonable, it need not maintain parity with municipalities like Srinagar Municipal Corporation, especially when no evidence was presented to establish that such a corporation actually issued licenses for liquor trade of the same nature.

Further relying on Lala Ram (D) v. Union of India [(2015) 5 SCC 813], the Court clarified that government authorities such as the Cantonment Board are well within their rights to enhance license fees, provided the enhancement serves a legitimate financial or administrative purpose. The Court quoted,

“A welfare state must serve larger public interest. Salus Populi est suprema lex—the welfare of the people is the supreme law. A State instrumentality must serve the society as a whole and must not grant unwarranted favour(s) to a particular class of people without any justification, at the cost of others.”

The Bench noted that the respondent had been paying license fees since 2016 with a 10% annual increase and raised no objection until 2021. The sudden objection in 2021 to a 30% increase, without furnishing any comparative data or documentary support from other Cantonment Boards, was held to be untenable.

On the issue of whether the license fee constituted a form of double taxation as argued by the respondent citing sanitation fees and profession tax the Court observed that these are distinct levies serving separate regulatory purposes. The Court found no merit in the plea that a higher license fee violated Article 14 merely because other business types such as restaurants or eateries were being charged less. It emphasized that,

“The business of sale of wine cannot be treated at par with other categories of business of eatables… the occupation undertaken by the respondent does not stem out of a fundamental right, but by way of a privilege.”

The Court further placed reliance on Delhi Race Club Ltd. v. Union of India [AIR 2012 SC 3408], which held,

“A license fee imposed for regulatory purposes is not conditioned by the fact that there must be a quid pro quo for the services rendered, but such license fee must be reasonable and not excessive… If there is a broad correlation between the expenditure which the State incurs and the fee charged, the fees could be sustained as reasonable.”

In view of these observations the court concluded that the enhanced license fee was neither arbitrary nor violative of Section 277(4) of the Cantonment Act. Accordingly, the Division Bench set aside the judgment of the Single Judge and dismissed the petition.

Case Title: Chief Executive Officer and Anr Vs M/s Highlander Bar and Restaurant and Ors.

Citation: 2025 LiveLaw (JKL) 223

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