Shut down ‘bars’ attached to TASMAC stores and recall licensing tender: Madras High Court

The Madras High Court recently ruled that the Tamil Nadu State Marketing Corporation (TASMAC) cannot endorse ‘bars’ attached to TASMAC stores by issuing licenses to a section of bidders.

A single-judge bench of Judge C. Saravanan decided that all “bars” attached to the respective TASMAC stores which currently enjoy a monopoly in the wholesale and retail sale of alcohol should be closed within six months.

The Madras High Court also detailed the reasons for its decision in the order relying mainly on Sections 4 and 4A of the Tamil Nadu Prohibition Act 1937.

Section 4A of the Prohibition Act speaks of punishment for being found intoxicated in a public place or for consuming alcohol in a private where the person consuming the alcohol is not authorized to do so.

The judge noted in his observations the following:

“The provision as it stands today does not allow a person to be in public while intoxicated. Therefore, the TASMAC respondents as a state monopoly can only limit themselves to the “wholesale” and “retail” sale of alcohol/liquor and may not be permitted to be seen actively encouraging a person to consume alcohol in a public space and violate the penalties provided for by law… TASMAC Defendants’ practice of allowing the proliferation of “Bar” within the meaning of Tamil Nadu Liquor Retail Vending (In Shops and Bars) Rules, 2003 is contrary to the provisions of the Tamil Nadu Prohibition Act , 1937″

The court observed that the power to grant a license to operate a bar can only be vested in the competent authority, namely the Commissioner of Prohibition and Excise. TASMAC is a mere “wholesale” and “retail” dealer and cannot operate a “Bar” by itself, directly or indirectly, the court added. Sub-Clause (1-A) and Section 17-C (1-B) of the Tamil Nadu Prohibition Act, 1937, which were inserted into the Prohibition Act via an amendment in 2003, simply allow TASMAC to do “wholesale” and “retail”. “. In 2003, Article 4(1)(j) and Article 4A were not amended and remained intact. Therefore, the newly inserted sections do not give TASMAC the right to confer on third parties the privilege of exercising the service of supplying short snacks or collecting used bottles of alcohol in the allied premises used as a bar.

If the law does not permit a person to be intoxicated in a public place, TASMAC cannot be considered to permit the consumption of alcohol in a public place. Even if the bar is not a public place, a person after consuming alcohol in said bar will have to pass through a public place to return home. Therefore, what TASMAC cannot do directly, it cannot do indirectly… intoxicate, the court added about the warning about the consumption of alcohol given in Section 4A of the Prohibition Act.

In the judgment, the court examines in detail the current business model of TASMAC and the historical background of the prohibition law in the state of Tamil Nadu. The court also traced the chronology of other laws relating to the wholesale and retail sale and consumption of alcohol in the state of Tamil Nadu in association with Article 47 of the Constitution. Article 47 mentions that the State shall endeavor to prohibit intoxicating liquors and drugs harmful to health. The 2003 amendments to the Tamil Nadu Prohibition Act 1937 which paved the way for the retail sale of Tamil Nadu liquor (in shops and bars), the 2003 rule simply contemplates the grant of exclusive license to TASMAC for retail sale under Rule 4 of the above-mentioned Rules under Section 17-C of the Prohibition Act of Tamil Nadu, 1937.

“Reality shows that the respondent TASMAC merely leases a small portion of the premises of a building for its retail stores. In the retail stores, its staff are stationed with the stock of liquor/liquor for sale to consumers and buyers…The TASMAC Respondents have not entered into any separate rental agreement with the owners of the premises in the Balance Zone which are used as a “bar” for consumers to consume alcohol/liquor purchased from TASMAC stores”

Based on the foregoing, the court observes that TASMAC encouraged the owners of these leased premises, who are often local and municipal authorities, to develop an area adjacent to the TASMAC retail store as a “bar” for consumption of alcohol. These premises are rented to licensees to help people who buy alcohol from TASMAC stores to consume alcohol.

The court also noted that Rule 9A of the Tamil Nadu Retail Liquor (In Shops and Bars) Rules 2003 mentions granting the privilege of running a “bar” to private parties by appeal of offers. The court reiterated that TASMAC cannot continue to auction this right to short sell dishes to private parties and collect used bottles under the guise of Rule 9A and that the power to grant a license does not is conferred only on the licensing authority, i.e. the Prohibition Commissioner. & Excise.

Fund

Judgment was delivered in a batch of written petitions filed by successful bidders from 2019 who were permitted to operate these allied bars until December 31, 2021. The license granted to these petitioners by TASMAC was for the collection of bottles used empty cars and the sale of short dishes by making use of these ancillary premises which are rented to them by their respective owners as “Bars”. The main grievance of the petitioners was that the pandemic had forced them to close these bars for almost fifteen months and that they had suffered losses due to fixed rental charges and staff salaries. They asked the court that the TASMAC allow them to operate the “bars” for another fifteen months.

According to the tender launched in 2019, bidders had to obtain “no objection certificates” in accordance with the court order in The deputy Collector/District Manager, Tamil Nadu State Marketing Corporation Tiruchirapalli cRRamkumar (2012) and a circular dated 2014. This requirement is missing from the new 2021 tender process. This has also been challenged by the petitioners.

Before considering the case on its merits, the court noted that there had been a mixed history in which drinking intoxicating beverages was an accepted and later stigmatized norm.

“Due to the evils and social menace and deleterious impact on society, the Madras Prohibition Act 1937 was enacted”observed the court.

“We have seen successive governments encourage the promotion of the sale and consumption of alcohol and spirits, presumably to increase state revenue. There has been a steady increase in the number of consumers due to the increase in disposable income and the consuming public seems to have been steeped in the culture of drinking Indian-made foreign liquors and imported foreign liquors which are sold by the TASMAC respondents as a state monopoly. associated with alcohol consumption gives way to a new social order “the court added.

As a result, writ petitions filed by former licensees were denied, ordering TASMAC to recall the tender and close existing “bars”.

Case title: S.Jagannathan v. The Managing Director, TASMAC & Ors and Related Affairs

Case no: WPNo.27352 of 2021 and others.

Citation: 2022 LiveLaw (Mad) 47

Click here to read/download the order

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