The Aryavarth Express
Agency (Bengaluru): The Karnataka High Court has quashed an order passed by the BBMP sealing the premises of Velvette Hotel in Bellandur, Bengaluru for non-renewal of trade license. The Court held that the BBMP’s insistence on the hotel obtaining an NOC from the landlord cannot be treated as a mandatory requirement in the absence of any provision in the law.
The order was passed by Justice S. Sunil Dutt Yadav on a writ petition filed by M/s Pancharathna Enterprises, a partnership firm running the Velvette Hotel, challenging the BBMP’s order dated August 8, 2023 to seize the hotel building till further orders for not renewing the trade license.
The hotel, represented by its Managing Partner Balaji Potharaj, contended that it had a 25-year lease agreement with the landlords since April 2017 and was granted trade license by the BBMP in July 2019. However, disputes arose between the hotel and the landlords, and the matter went into arbitration.
During this time, when the hotel sought renewal of trade license in January 2023, the BBMP insisted that it obtain an NOC from the landlord. On the hotel’s failure to produce the NOC, the BBMP sealed the premises, which was challenged by the hotel in the High Court.
The Court noted that as per Section 305 of the Bruhat Bengaluru Mahanagara Palike Act, 2020, the Zonal Commissioner has the power to grant trade license for establishment and operation of restaurants. The manner of procuring such license has to be provided in the rules or bylaws.
However, the Court found that the procedural requirements contemplated under the rules or bylaws were absent in the present case. The BBMP had insisted on an NOC from the landlord by way of a communication in January 2023.
“If that were to be so, the imposition of condition such as obtaining of NOC from landlord could at best be construed to be a procedural requirement that cannot be mandatorily insisted upon in the absence of any statutory backing either under the Act or in the rules which are in the nature of delegated legislation,” the Court said.
The High Court observed that in the absence of statutory backing, restriction on the fundamental right to carry on business under Article 19(1)(g) of the Constitution cannot be permitted except on the grounds specified in Article 19(6), i.e. in the interest of the general public.
“Prima facie the insistence on NOC from landlord would not fall into the category of permissible restriction envisaged under Article 19(6). Accordingly, the insisting on obtaining of NOC cannot be construed to be a mandatory requirement,” the Court held.
The Court also relied on an earlier division bench ruling in Smt.Prema vs State of Karnataka (2009) which held that requirement of an NOC is only a procedural requirement and cannot be insisted upon in all circumstances. In that case too, there was a dispute between the landlord and the tenant, and the Court had dispensed with the requirement of an NOC for grant of trade license.
The High Court noted that the petitioner-hotel continues to be in possession of the leased property till the adjudication of the dispute with the landlords in arbitration. In this context, the Court referred to the Supreme Court’s observation in Sudhakaran v. Corporation of Trivandrum (2016) that “valid tenancy itself have implied authority of the landlord for legitimate use of the premises by the tenant.”
Regarding the dispute between the partners of the hotel firm, the High Court said it was an extraneous factor vis-à-vis the hotel’s claim for trade license and was subject matter of separate arbitration proceedings.
“Needless to state the outcome of the arbitration proceedings between the landlord and the petitioner and the partners inter se may have a bearing on the right of the petitioner to carry on business and such contingency would arise only when the proceedings referred to above reach a legal finality,” the Court said.
While not interfering with the conclusion of the BBMP’s order, the High Court set aside the premise of the order and directed that the hotel’s request for renewal of trade license or a fresh license may be considered without reference to the NOC from the landlord.
“In light of discussion made above, once the request for renewal/issuance of fresh licence is considered in the affirmative, the sealing of establishment at Annexure-M would stand set aside,” the Court ordered, while disposing of the writ petition.
