Shops and

Establishments Act
and licenses
required to
operate a Hotel.
BHMCT - II Year HOTEL LAW Page 17

UNIT - II
Hotel Licenses and Permissions

Hotels and Catering establishments in India and any part of the world, have
a binding on the owners and the managers to fulfill certain obligations.

There is an unwritten obligation to satisfy the customer or clients both in

providing accommodation, serving of food and other services.

There are certain written contracts, mutually agreed upon by the Hotel
Industry and the employees, who form a major part in the successful
running of the hotel.

Finally, there are some Statutory and Legal obligation, which every hotel is
supposed to carryout and fulfill and safe guard the safety, health an well-
being of the people working, staying and enjoying the services of the hotel.

A Star Hotel or any other hotel for instance comprises of the following basic
activities as minimum service for the clients,

1. Accommodation
2. Restaurants
3. Bars (Liquor Services)
4. Entertainment & Health Services
5. Shopping provisions
6. Services of the kind required for tourists

It is important for the Hotel industry to comply with certain laws and
regulations which are imposed by the Local Governments and Statutory
bodies for the proper functioning of the Hotels.

1. Laws pertaining to the production and service of Food, generally

referred to as “ Food Laws”
2. Laws relating to providing accommodation on temporary basis for
small stay.
3. Laws relating to the people working the hotel establishments,
“Labour Laws” or Industries or Factory Acts.

BHMCT - II Year HOTEL LAW Page 18

It is the primary obligation of every hotel , that it should be registered, so
that it has the legal sanction to operate as a place of public service.
Registration of the establishment may be carried out by the local area
authority of regions and controlled by Central Government department
depending upon the location and size of the facility.

The process generally requires owners and /or managers to obtain a

prescribed from of registration from the relevant department, complete it
with the information asked for, and submit it with the prescribed registration
fees.

Every hotel, food and beverage establishment need to provide the

following information to the Registrar’s office:

1. Name of the employer and /or manager

2. Area of the premises
3. Value of the premises
4. Water and light connections existing or required with in the
establishment
5. No. of employees on the roll ( premises )
6. Medical and other facilities provided for the employees
7. Contribution to the employees provident fund and other
insurance schemes of the employees.
8. Postal Address of the establishment
9. Name in which the Hotel or the establishment should be registered
10. Category of food and beverage service being provided. ( Star
Category, Restaurants types etc.)

Hotels and other supplementary accommodation are an integral part of a

tourist's visit to a place and the services offered by them can make or mar
a visit completely.

Vacation ownership popularly known as Time Share is one of the fastest

growing component of tourism. Time Share Resorts (TSR) are increasingly
becoming popular for the leisure holidays and family holidays, etc.

With the aim of providing standardized world class services to the tourists,
the Government of India, Ministry of Tourism has a voluntary scheme for
classification of fully operational Time Share Resorts in the 5 Star, 4 Star and
3 Star categories.

BHMCT - II Year HOTEL LAW Page 19

Hotels, Restaurants, Lodging houses, bars etc., have to obtain certain
licenses from the local government authorities of their respective areas for
establishing their industry or services.

Following are the various types of Registration, Licenses and permissions

needed for carrying the business of Hotel Industry.

1. Registration under Shops and Establishment Act.

2. Registration under Factories Act.
3. Various Licenses which are to be issued by the Local Municipalities
and local governing bodies.

Licenses from Local Authorities :

a. License for Lodging House ( Accommodation )

b. License for Eating House ( Restaurant )
c. License for Beverage Service ( Bars )
d. License from Police Authorities ( for eating house, bars,
swimming pools etc)
e. Fire and Prevention Safety Act
f. Prevention of Food and Adulteration Act.
g. Licenses for various other Equipments from Inspector of
Factories are essential :
i. Lifts
ii. Generating Sets
iii. Boilers
iv. Cold Storage
v. LPG Storage Tanks
vi. Registration of Foreigners
vii. Employees State Insurance ( ESI )
viii. Employees Provident Fund ( EPF )
ix. Insurances
h. Foreign Exchange License
i. Permission from local municipalities for Supply of Water,
Electricity and other Disposable like , draining systems,
garbage disposable modes,
j. Certification from Pollution Control Boards.
k. Music and Dancing Licenses.
l. Late Night Refreshment house license

BHMCT - II Year HOTEL LAW Page 20

The Hotel & Restaurant Approval & Classification Committee (HRACC)
inspects and assesses the Hotel based on facilities and services offered.

Within thirty days after commencing business, each operator of any hotel
renting occupancy to transients shall register the hotel with the director of
finance and obtain from him or her a "Transient Occupancy Registration
Certificate" to be at all times posted in a conspicuous place on the
premises. Such certificate shall, among other things, state the following:

(a) The name of the operator.

(b) The address of the hotel.

(c) The date upon which the certificate was issued.

(d)"His/her Transient Occupancy Registration Certificate signifies that the

person named on the face hereof has fulfilled the requirements of the
Uniform Transient Occupancy Tax Ordinance by registering with the
Director of Finance for the purpose of collecting from transients the
Transient Occupancy Tax and remitting said tax to the Director of Finance.

This certificate does not authorize any person to conduct any unlawful
business or to conduct any lawful business in an unlawful manner, nor to
operate a hotel without strictly complying with all local applicable laws,
including but not limited to those requiring a permit from any board,
commission, department or office of this city.

For classification and project approvals in the 5 Star, 4 Star and 3 Star, the
applications along with the requisite fees may be sent to:-

Hotel and Restaurants Division

Ministry of Tourism, Government of India
C-I Hutments, Dalhousie Road, New Delhi-110001.

the BHMCT - II Year HOTEL LAW Page 21

Registration made under Shops and Establishment Act:

An application has to be made on Form C of the (Shops and Establishment

Act along with the necessary fees to be deposited in prescribed manner
under the Act.

The Chief Inspector (Shops and Est.) is the issuing authority for this license.

Registration made under Factories Act:

In the areas of Production and Services of a hotel where in more than 10

p[people are employed using power driven equipments and where power
is not being used and 20 or more employees are being employed, the
organization has to be registered under the Factories Act.

The Chief Inspector of Factories is authorized to issue the registered

certificate.

Licenses to be issued by the Municipal Authorities:

a.) Accommodation / Lodging House

Application for obtaining a license for accommodation or

lodging house is to be made on the prescribed form giving
particulars pertaining to Hotel in the manner below:

Name of the establishment,

Location of the premises,
Name of the proprietor/ partners,
Father’s name, caste,
Residential address,
Name of the keeper, whether owner/tenant,
Number of stories,
Year of grant of original license,
Last year’s license number,
Electrical Power Load,
Number of workers etc. Before the local Medical authority.

After examining the detailed particulars given by the applicant

and after being satisfied with regard To property fulfilling various conditions
as laid down in the Municipal bye-laws framed by local

the BHMCT - II Year HOTEL LAW Page 22

municipal authorities, will issue a demand notice asking the management
to pay the amount of license fee prescribed under the bye-laws. Ol

After the payment is made the local authorities will issue the necessary
license for the lodging house.

Restaurants or Eating Houses :

For obtaining a license for Eating Houses, an application has to be made

separately for each eating house indicating the name and address of the
licensee, List of articles sold in his eating house etc., in the prescribed form
to the local municipal health authorities.

1. Certificate is to b e issued in the name of the officer who has been

nominated by the management ie., competent authority, to be
responsible for the implementation of the provision in the prevention
of Food Adulteration Act.
2. Certificate or true copy or a photocopy of the certificate to be
issued by the municipal health department , certifying that the staff
engaged in food handling has been inoculated, medically
examined, and is fit to serve along with a copy of the last year’s
license.

Municipal authorities will inspect the site and examine the application and
after being satisfied will issue a demand notice for the payment of fees as
prescribed in the Municipal bye-laws, After the fees has been deposited,
the Municipal Authorities concern will issue a certificate license in this
regard

Bars – Alcoholic Beverages : ( L -3 , L-5, L-20 )

For operating the bars, licenses have to be obtained from the excise
department on application and payment of appropriate fees. The licenses
generally obtained are given below :

L – 3 for Room Service

L - 5 for Bar attached to the Restaurants
L – 20 for Private Parties.

For obtaining these licenses, the application has to be made in the Excise
Commissioner indicating the category of license, name and description of
the bar attached with restaurant /dinning hall.

the BHMCT - II Year HOTEL LAW Page 23

L- 20 license is issued in the case number of foreign guest attending the
party is clearly mentioned and for which application is to be given to the
Excise Commissioner one week in advance along with the stipulated fee
for the same.

Other Licenses pertaining to alcoholic beverages are as given below:

L - 1 Wholesale or retail vending of foreign liquor ( for trading only)

L - 3 Retail sale of foreign liquor for restaurants
L– 5 Retail Sales of foreign liquor in bar attached to a restaurant
L– 10 Retail Sale of Beer “ON’ and ‘OFF’ the contract premises
L-13 Wholesale selling of country spirit
L-14 Retail selling of country spirit
L- 20 Obtaining License for private parties.

Licenses to be obtained from the Police Authority under the State Police Act
:

Besides obtaining a license from the Municipal Authorities, a Hotel has also
to be registered will the local police s prescribed in the Act.

While applying for police permission it is necessary to attaché the copy of

certificate issued by the Municipal Authority.

Along with the application, the hotelier has to submit the plan site of the
hotel and the address and place where the liquor will be served.

License shall be issued by the police commissioner only after a prescribed

fee for the same is paid.

All Restaurants and Eating houses will have to be registered with the local
police and the information referred to the above will have to be provided.

Swimming Pools have to register with the local police along with the site
plan, A certificate for fitness has to be obtained from the Municipal
Authorities.

All safety equipment and trainer along with a rescue team’s availability is
very essential for a swimming pool area.

the BHMCT - II Year HOTEL LAW Page 24

Fire Prevention and Fire Safety Act , 1986

All hotels are required to obtain ‘NO OBJECTION’ certificate from the Fire
Services before applying for renewal of license from the municipal authority
and the police. The issuing authority for this license is the Chief Fire Officer
Fire Services

Prevention of Food Adulteration (Amendment) Act 1976 rule 12B of the PFA
(First Amendment) Rules, 1977

One officer of the Hotel is made responsible for the purpose of Prevention
Food Adulteration ACT with the authority to exercise all power and take all
such steps as are necessary or expedient to prevent the commission by the
hotel of any offence under the said Act and rules as amended from time
to time.

In case of any offence under the said Act or the rules takes place, in any of
the units the person who has been nominated against their unit shall be
responsible on behalf of the Hotel for that offense and shall be liable for
such penalty or penalties as may be imposed for the commission of
offence.

Other General Licenses:

Lifts : Inspector of Lifts, Office of Electrical Inspectorate, who after

inspecting the lift, will issue a challan and the required fee will have to be
deposited with the Treasury and a license will issued in Form C

Licenses which are to be renewed Every Year :

a. Generating Sets: For operating generating set, the application is to

be made to the municipal authorities to issue the license.
b. Boilers: A license will be issued by the municipal authorities under the
Factories Act the Chief Inspector, Boiler and Smokes, State
Administration.
c. Cold Storage: A license will be issued by the Deputy Senior Marketing
Development Officer of the Directorate of Marketing and Inspection.
Ministry of Rural Development.
d. Registration of Foreigners : Under the police Act, all foreigners staying
the hotel will have to be registered with 245 hours with the FRRO,
Police H.Q. Particulars to be provided a prescribed in Form C

BHMCT - II Year HOTEL LAW Page 25

 e. Employees State Insurance : ESI Where employees are
covered under the Factories Act, such employees will be covered by
the ESI. Necessary registration will be done by the ESI commissioner

g. Employees’ Provident Fund : After meeting the condition s laid

down under the Act, the establishment has to be registered with
the EPF authorities. In the case of new unit, the relief is given for
certain number of years. In other establishments all employed, on
completion of 60 days service, are eligible to be enrolled as
member of the Provident Fund Scheme.

The P.F Commissioner is the registering authority.

h. Insurance : Following insurances are to be taken by hotels:

1. Insurance against Fire, Floods, Earthquakes, Civil riots,

malicious risk, etc.
2. Insurance against cash in sage, burglary and house-
breaking
3. Insurance against third party risk.

i. Foreign Exchange License:

Department of economic affairs, Ministry of Finance, Government

of India has issued a notification dated 20.08.1981

“For the purpose of accepting foreign currency, hotels are

required to obtain license from the Exchange Control Department
of the Reserve Bank of India. The license is restricted only to
accept foreign currency and does not entitle the hotel to sell
foreign currency.”

j. Weights and Measures :

Once in a year, all weighing scales, machines measuring jars etc,

are required to be calibrated and stamped by the authorized
agency. Inspector of weights and Measures department of the
concerned state administration is entrusted with this responsibility.

BHMCT - II Year HOTEL LAW Page 26

Residential License:
A residential license may be granted only for premises for the purpose of
providing board and lodging including breakfast and at least one of the
other customary main meals.

● Water and other suitable non-intoxicating beverages must be

available to the customers.
● Under this restaurant license, the drinks can be sold or supplied at
any time because there are no licensing hours.
● Combined License or Restaurant and Residential License is a
combination of two. This is granted for premises which fulfill the
conditions required for the restaurant license and the residential
license for e.g. a private house with a public dining room
attached.
● Other beverages must be available, there must be a sitting room
for non-drinkers and the meals must be table meals.

Type of Licenses :

Depending upon the establishment and the requirements, application may

be made for a liquor license. The excise authority may grant the following
licenses :

1. Public House : Consumption on or off the premises

2. Off Sale: Consumption off the premises only
3. Hotel: Consumption on or off the premises.
4. Restricted Hotel: To residents and their bona fide entertained
by them and to non –residents as an ancillary to table meals
taken on the premises.
5. Restaurants: With meals either at bar or at table
6. Refreshment: For consumption on the premises, when food
and non-alcoholic beverages are also on sale. No bar counter
7. Entertainment: As an ancillary to public entertainment at the
cinema, theater, dance hall or priority club, subject to
conditions determined by the licensing authority.

Licenses are granted for the premises in whole are in part. The premises must
be fit to meet the requirements of the local authority, police and fire
authority. Proper and good order must be mentioned.

BHMCT - II Year HOTEL LAW Page 27

1. No Drunkenness
2. No Violence
 3. No riotous conduct
4. No Prostitutes
5. No gaming.

ON License:

This license is issued for sale of all or some classes of liquors for consumption
either on or off the premises. There classes are:

1. Beer, cider or wine.

2. Beer and cider
3. Cider
4. Wine.

OFF License:

When applying for an on-license, if it can be shown that part of the

premises, for which a license is being sought, is separated from the premises
where liquor is sold for consumption there is no internal communication
from one part of premises so separated, fro the same permitted house as
are allowed for premises operating under a separate off license.

The license is obtained for sale or consumption off the premises of:
1. Intoxicating liquor of all descriptions, and
2. Beer, cider or wine.

Restaurant License:

This can be granted for premises which are structurally built or adapted and
are used in a bona fi0de way intended to be used for the habitual
provisions of the main midday and or the main evening meals.

For this purpose, the meal must be table meal.

There is no provision that the drink must be taken at the tab le. A diner can
buy a drink before or after a meal, even in another room, but must be
ancillary to that meal.

The license permits the sale of intoxicating liquor only as an

accompaniment to table meals.

BHMCT - II Year HOTEL LAW Page 28

Application for a License:

The general procedure to be followed for a license is as follows:

1. An application is made to the licensing authority enclosing a plan

of the premises to be licensed. Intention may also be made
regarding application to police authority, fire authority etc.
2. Before submitting application, cause notice of application to be
displayed in a place where it can conveniently be read by the
public on or near the premises to be licensed.
3. As per the directions of the licensing authorities, notice of the
application to be advertised in a local newspaper.

Notices must give the name and address of the applicant, his trade or
calling during the six months preceding the giving of the notice, a
description of the license for which he intends to apply and a description
of the situation of premises.

The following persons are disqualified from holding a license:

1. An officer of the licensing authority
2. Any person convicted of forging or causing a forged license
knowing it to have been forged.
3. A holder of license convicted for allowing licensed premises to be
used as brothel
4. Any person ordered to be disqualified on conviction for selling
liquor without license,
5. Any person disqualified under any other Act.

An applicant for anew license, if so required by the authority, must attend

in person and application may be postponed until he doe attend. The
authority considers the new application after all other cases have been
dealt with, and may take into account any competent objections.

The authority may decide to consider an objection by the police officer at

shorter notice if satisfied with the reasons for delay provided the applicant
is notified before the meeting. Objection can only be made on the
following grounds:

a. The applicant or prospective manager is not suitable

b. The premises are not suitable or convenient

BHMCT - II Year HOTEL LAW Page 29

 c. The use of the premises for sale of alcoholic liquor is likely to cause
undue public nuisance, or a threat to public order or safety.
d. To grant the applicant would result in over-provision of facilities.

An applicant refused a license may appeal, and a competent objector

may appeal against a grant. There is an appeal to a court against the
grant or refusal of license.

The Grant of License:

The license is granted to one or more individuals in respect of particular

premises. If the premises are occupied by a tenant the license is granted to
him not the landlord. Where a corporate body is concerned, the license
may be in the name of the director, secretary or other official, either alone
or with the manager of the premises.

When granting any type of license, the board may specify the liquor which
may be supplied as a) all types, b) wine, porter, ale, beer, cider and Perry
or c) porter, ale, beer, cider and Perry.

A new license comes into effect on being granted, except where objection
was made at the hearing, when its effect dates from the time when an
appeal may be made and it has elapsed, it then continues to be in effect
three years after the grant or renewal

There is no discretion to attach conditions to an on-license so as to prohibit

a bar. The holder of an on-license or the applicant for a new license may
ask for a condition to be attached to provide that a certain times of the
year there shall be no permitted hours in the premises.

Where the license is granted in respect of premises open only for lunch or
dinner, a condition may be attached limiting the permitted hours to the
lunch period or the dinner period.

Grant of license is complete only when the requirements of the licensing

authority of the same are fulfilled only and supported with documents as
required in the prescribed application format and it annexure, other wise
the application shall be liable to be rejected.

BHMCT - II Year HOTEL LAW Page 30

Structure and Premises:

The authorities have some control over the structure of the licensed
premises. Any alteration proposed to be made to on-license premises
which give increasing dining facilities in a public or common part of the
premises used for drinking or affect communication between the public
part where liquor is sold and the remainder of the premised and any street
or public way must be approved the licensing authority.

If unauthorized alterations are made, the license may be forfeited on order

of a court of summary jurisdiction. The authorities have power to require
structural alterations to be made with in the limits mentioned before
granting a renewal of license. They have no control over the structure of
off-license.

Provisional Grant of New License :

Where new premises are abut to be constructed or are in course of

construction or existing premises are about to be altered or extended for
the purpose of sale of liquor, whether for consumption on or off the
premises, person interested may make application for a provisional grant in
respect of such premises, and the authority may grant provisional license, if
satisfied with the plans, or a plant sufficient to identify the site, and
description of the premises.

Provisional grant is not valid until declared final by order of the licensing
authorities, made after proper notice has been given, and subject to no
objection s to the character of the provisional license. The same notices are
required as for new licenses, and the declaration of finality in effect the
grant of a new license.

Register of Licenses

It is the duty of license office to keep a register of licenses granted in the

state. The register contains a list of premises concerned, the name of the
owner, and the holder of license for the time being, and details of any
offence committed by the license-holder any rate- payer, license- holder
or owner of the licensed premises in the state may inspect the register on
payment of a fee, police officer may inspect without payment.

BHMCT - II Year HOTEL LAW Page 30

Renewal:

An occupier of the licensed premises is the person entitled to apply for the
renewal of the license. An applicant for the renewal of a license of his
agent has to submit an application. No formal notice is necessary. In some
areas one application may be made by a local association on behalf of
the members, otherwise application should be made by a letter.

Renewal can only bee granted where the license is in force at the time of
meeting. The term ‘renewal’ applies only to the continuance of the license
on the existing basis.

Transfer:

A temporary transfer, requiring confirmation at the next meeting, may be

granted where a licensee has died or become bankrupt, insolvent or
incapable, to an applicant is possession of the premises: the application
has to be made by and executor, trustee or other person acting on behalf
of the licensee.

Transfers can be granted only in certain circumstances and to certain

persons but the license need not be in the force at the time. Some of the
cases are:

1. Death of license holder

2. In capacity of license-holder to carry on business owing to illness
or infirmity
3. Bankruptcy of license-holder-his trustee or the new tenant or
occupier
4. Occupation of premises given up or about to be given up by the
license holder.
5. Willful omission or neglect of occupier to apply for renewal
6. Where a license has been forfeited b y reason of personal act of
license holder and another person has obtained a protection
order