Introduction:
In a significant judgment safeguarding fairness in administrative decisions, the Orissa High Court in Smt. Puspalata Samal v. State of Odisha & Ors. (W.P.(C) No. 22144 of 2022) delivered on October 29, 2025, extended relief to the petitioner, an IMFL On Shop owner, who was unjustly asked to pay license fees from 2018-19 onwards despite her shop remaining closed pursuant to the Supreme Court’s landmark verdict in State of Tamil Nadu & Ors. v. K. Balu & Anr. (2016). The Division Bench comprising Chief Justice Harish Tandon and Justice Manash Ranjan Pathak ruled that demanding fees for a period during which the shop’s closure was compelled by a judicial directive would amount to an irrational and arbitrary exercise of administrative discretion. The Court emphasized the principle of reasonableness in State actions, particularly when citizens are prevented from conducting their business by operation of law rather than by voluntary choice. The judgment not only reiterates the sanctity of fairness in governance but also delineates the distinction between voluntary and involuntary closures under regulatory regimes.
Arguments on Behalf of the Petitioner:
Senior Advocate Mr. Prafulla Kumar Rath, representing the petitioner, advanced a strong challenge to the Excise Department’s insistence on payment of license fees from 2018-19 as a precondition for license renewal. The petitioner’s primary contention was rooted in the fundamental principle that one cannot be penalized for an act compelled by law or judicial orders. The petitioner was granted a valid IMFL On Shop license in 2009-10 after due compliance with all statutory requirements, and the license was regularly renewed until 2016-17. However, in the wake of the Supreme Court’s 2016 decision in State of Tamil Nadu v. K. Balu, mandating closure of all liquor vends situated within 500 meters of National and State Highways, her shop was compelled to shut down as it fell within the prohibited zone. The petitioner argued that such closure was “involuntary” and executed solely in obedience to the Supreme Court’s directive.
The counsel further invoked Section 35 of the Odisha Excise Act, asserting that license fees could only be charged for non-compliance with license conditions attributable to the licensee’s fault. Since the closure was mandated by law, the liability for license fees did not arise. It was contended that charging fees for the period when the shop was inoperative was contrary to the doctrine of fairness and proportionality. The petitioner also pointed out that for the financial year 2017-18, the Government had consciously waived license fees recognizing the involuntary nature of closures. Therefore, the subsequent demand for fees from 2018-19 onwards was arbitrary, irrational, and unsustainable in law.
The petitioner further highlighted that she had promptly complied with the authorities’ request to suggest an alternative unobjectionable site for relocating the shop, demonstrating bona fide intent to resume lawful business operations. Despite this cooperation, the Department’s insistence on paying license fees for the intervening period amounted to administrative overreach and an unjust enrichment at the expense of a law-abiding citizen.
Arguments on Behalf of the State:
On behalf of the State, Additional Government Advocate Mr. Subha Bikash Panda contended that the petition itself was not maintainable under Article 227 of the Constitution and should have been filed under Article 226. He further argued that under Section 35 of the Odisha Excise Act, payment of license fees was a statutory obligation and that renewal could not be considered unless arrears were cleared. It was maintained that the statutory requirement was independent of the reasons for non-operation of the shop. The State also sought to justify its decision by asserting that since the petitioner had not operated the shop or obtained a fresh license during the intervening period, the Excise Department was justified in demanding payment of the requisite fees as a condition precedent for renewal.
It was also submitted that, following the Supreme Court’s subsequent relaxation in Arrive Safe Society of Chandigarh v. UT Chandigarh (2017), the State had allowed reopening of shops located within municipal limits, provided other statutory conditions were fulfilled. Therefore, according to the State, it was incumbent upon the petitioner to complete all procedural formalities, including payment of the prescribed fees, before renewal could be considered. The State’s stand essentially rested on the technical interpretation that license fees were statutory dues not dependent on actual operation of the shop, but on the existence of the license itself.
Court’s Analysis and Findings:
After examining the rival contentions and perusing the material on record, the Division Bench embarked on a nuanced interpretation of the interplay between the Supreme Court’s directives, the Odisha Excise Act, and the principles of administrative fairness. The Court began by recapitulating the factual matrix — that the petitioner’s shop was compelled to close down following the Supreme Court’s categorical order in K. Balu prohibiting liquor vends within 500 meters of highways. This closure was undeniably not voluntary but mandated by law.
The Court then referred to the Supreme Court’s subsequent modification in Arrive Safe Society (2017), which had relaxed the distance norms for establishments situated within municipal or local body areas, thereby giving States the discretion to decide whether to extend or withdraw the prohibition in such cases. In light of this, the Odisha Government had exempted shops within municipal limits from closure, subject to compliance with conditions. However, the Court noted that the Excise Department’s conduct in demanding license fees from the petitioner for the intervening period was inconsistent with the Government’s own conscious policy decision to waive such fees for shops affected by the K. Balu ruling.
The Bench, speaking through Chief Justice Harish Tandon, made a critical distinction between “voluntary closure” and “involuntary closure.” It held that when a licensee willingly discontinues business operations, the Government may legitimately demand payment of license fees for non-compliance with licensing terms. However, where closure is enforced by judicial mandate or statutory prohibition, the licensee cannot be faulted, and consequently, the imposition of fees would lack legal justification. The Court underscored that fairness and rationality are inherent requirements of administrative action under Article 14 of the Constitution.
The judgment observed that the Government’s earlier decision to waive license fees for the financial year 2017-18 implicitly recognized the involuntary nature of the closure. Therefore, the subsequent insistence on license fees for 2018-19 and beyond, while the shop remained non-operational and the petitioner was seeking relocation approval, was illogical and arbitrary. The Court emphasized that if the State itself had prohibited the operation of the shop due to highway proximity, it could not, in the same breath, demand fees for the period when it had restrained the licensee from functioning.
The Bench also invoked the doctrine of legitimate expectation, holding that when the Government had earlier demonstrated a consistent policy of waiving license fees for similarly situated licensees, the petitioner was entitled to expect equal treatment. Any deviation without reasonable justification would violate the principle of non-arbitrariness, which is the cornerstone of administrative justice.
The Court also noted that the Excise Department’s insistence on payment of fees as a precondition for renewal was not backed by any statutory or policy rationale, especially when the petitioner had already suggested an unobjectionable site for relocation. The demand was thus characterized as an act of “mechanical and unjustified insistence,” contrary to the settled principles of proportionality and fairness.
The Bench categorically held:
“If the Government has taken a conscious decision to waive the license fees or other statutory impositions for the period when the shop allotted to the petitioner comes within the mischief of the distance norms, we do not find any rationality or reasonability in charging the fees for the next year when the Government was conscious that the petitioner was not permitted to run the shop at the said site.”
Accordingly, the Court quashed the impugned letter issued by the Excise Department demanding license fees from 2018-19 onwards and directed the authorities to immediately process the renewal of the petitioner’s license at the new unobjectionable site suggested by her. The judgment thus not only provided relief to the petitioner but also set a precedent for similarly situated licensees who were compelled to close their businesses due to judicially mandated restrictions.
Judgment:
The Orissa High Court held that demanding license fees for a period during which the licensee was legally prohibited from operating the shop constituted an illegal exercise of discretion and violated the principles of fairness. The Court reaffirmed that administrative authorities must act reasonably and proportionately, especially when enforcing fiscal or regulatory obligations upon citizens. The demand for fees from 2018-19 onwards was declared unsustainable in law and was accordingly quashed. The Excise Department was directed to renew the license at the petitioner’s proposed site without insisting on payment of the waived fees.