Liquor Licensee Can't Avoid Licence Fee By Citing Business Losses, Natural Calamities: Himachal Pradesh HC

The Himachal Pradesh High Court has held that a liquor licence holder cannot back out of its obligation to pay the licence fee after voluntarily participating in an auction and accepting the licence terms, merely because the business later became commercially unviable.

The court ruled that business losses, natural calamities or lower liquor prices in a neighbouring State do not dilute the contractual obligations arising from the licence

A Division Bench of Justices Vivek Singh Thakur and Ranjan Sharma upheld the cancellation of the liquor licence granted to Kanda Wine after it defaulted in paying the monthly licence fee.

The court also upheld the appellate order, the freezing of the firm's bank account, and rejected its challenge to Clause 2.42 of the Annual Excise Announcements. The bench observed:

"The Question formulated [in Para 7 of judgement] as to whether the petitioner after having accepted the contract for liquor business, can resile from or wriggle out of the express contractual obligations and /or otherwise evade liability for payment of license fee and penalty etc. upon the cancellation of liquor license; is answered in the negative..."

Kanda Wine obtained a retail liquor licence for the 2023-24 excise year with a licence fee of ₹9.20 crore. It paid the licence fee initially but defaulted from September 2023 onwards.

The Excise Department issued repeated notices and granted several opportunities to clear the outstanding dues before cancelling the licence. The appellate authority also dismissed the firm's appeal after giving it further opportunities to make the payment.

Before the High Court, the firm argued that natural calamities in Himachal Pradesh had affected its business and that lower liquor prices in neighbouring Punjab had reduced sales, making it difficult to pay the licence fee.

It also contended that its bank account had been frozen before it could arrange the payment and challenged Clause 2.42 as arbitrary. The State argued that the licence holder had accepted the licence conditions with full knowledge and repeatedly defaulted despite several notices and personal hearings.

The court held that the licence was cancelled only after repeated notices and multiple opportunities to clear the dues, including during the appeal. It ruled that the licence holder could not seek to alter the agreed contractual terms because the business later became commercially unviable.

The court observed, "The plea of fairness cannot be invoked so as to modify or alter the stipulated conditions of contact. Accepting the plea of the petitioner shall lead to rewriting of contract or would tantamount to introducing new conditions is impermissible and same is outside the purview of this Court."

It further observed, "In an executory contract, there is no guarantee for profits and no warranty against losses. A party, after having accepted the contract, cannot be permitted to blow 'hot and cold' by enjoying the profits under the contract but in questioning the terms and conditions when it comes to suffering losses."

In the connected matter, four persons challenged recovery proceedings initiated against them on the ground that they were partners of Kanda Wine.

The court held that the dispute involved contested questions of fact that should be decided by the statutory appellate authority. It allowed them to file an appeal and directed that no coercive action be taken against them until the appeal is decided. This is provided that they approach the appellate authority within 30 days.

For Petitioner: Advocate H.S. Rana and Amrinder Singh,

For Respondents: Anup Rattan, Advocate General, with Mr. Sushant Keprate, Additional Advocate General for State and for Respondents 6 to 9 / Petitioners in connected matter: Mr. Subhash Sharma, Senior Advocate, with Mr. Prantap Sharma, Advocate.