How HipBar Bengaluru’s digital agenda to home deliver liquor suffered a setback with Karnataka HC verdict

  • As the first liquor home delivery vendor in Bengaluru, HipBar set lofty compliance standards with regard to delivery timing and possession limits.

  • When the Excise Department 'arbitrarily' withdrew its Letter of Authority, the company challenged it.

  • However, the Karnataka High Court's judgement has gone against the company and is a significant setback in its endeavour to digitally transform the industry.

Prasanna Natarajan, Founder HipBar Bengaluru, was convinced that his idea to home deliver the choicest of liquor brands, was an idea whose time has come. However, On 3 November 2018, the Letter of Authority issued to HipBar was withdrawn by the Excise Department, ending it ahead of its tenure. “This decision was arrived at, following an alleged and baseless piece of propaganda unleashed by a vernacular news channel. This malicious and false news story had far-reaching implications for a small startup like us, and continues to threaten what could blossom into a great consumer service of some permanence,” rues Prasanna. He says the company will appeal against this order.

When all efforts by HipBar to restart operations failed, they approached the Hon’ble Karnataka High Court challenging the arbitrary withdrawal of the authority issued against them, he adds.

 How HipBar Bengaluru’s digital agenda to home deliver liquor suffered a setback with Karnataka HC verdict

Representational image. AFP

Unfortunately, the judgement has gone against the company and is a significant setback in its endeavor to digitally transform the industry. The High Court has failed to appreciate the “nuances of our business model and the transparency it achieves by creating an organised structure for the otherwise under-the-radar home delivery practices that continue to exist.”

The background

One needs to understand the context and background as to how and why HipBar came up with the idea to deliver liquor to Bengaluru homes. Soon after the Supreme Court’s judgement in 2016 banning sale of liquor in the periphery of national and state highways, the state of Karnataka had lost nearly about 1,900 CL2 stores, including stores in the city of Bengaluru, especially in key areas like MG Road, Outer Ring Road, Bellary Road etc. Following this sudden development, many operators and CL2 Licensees were rampantly undertaking home delivery of alcoholic beverages without any formal approval from the Karnataka Excise Department. Logically, there were two options before the Excise Department at that juncture - to either clamp down on such practices and act against the defaulters which can get them entangled in a legal quagmire, or to put in place an effective and transparent system that can be regulated so that convenience and safety of adult consumers are given paramount importance through a system of licensing.

Transparent proposal

It was at this time that HipBar approached the excise department with the proposal for home delivery of alcoholic beverages with full oversight and knowledge sharing. HipBar had developed e-Governance tools for the Excise Department, including facilities to monitor the operations, track movements, provide real-time reports on orders generated and fulfilled from its system, and enforce stringent age verification processes. As there were no precedents of such a business model in India, the department, in order to ascertain the landscape and study the pros and cons of the e-ordering and home delivery system on a first-hand basis, proceeded on the basis of a “Letter of Authority” which was granted scope for HipBar to conduct a pilot for online order processing and home delivery of alcoholic beverages. By that time, HipBar’s payment system was already operating in more than 100 CL2 shops in Bengaluru. The delivery services commenced in October 2017 at HipBar’s own costs.

Committee formed

After the first 9 months operating the pilot project, in July 2018, HipBar presented the Department with a comprehensive report titled “A Case for technology assisted home delivery of alcoholic beverages in the state of Karnataka”, including suggestive policy based on global best practices. Armed with the data on consumer behavior, thereafter, the Excise Department formed a Committee to take the views and opinions of the different stakeholders under the Chairmanship of Additional Commissioner of Excise (IML) in the month of October, 2018.

The Committee was studying the various facets and safeguards mandatory for online home delivery including but not limited to:

— Non-inducement of drinking
— Processes for age verification at the time of delivery
— Restrictions on order processing during permitted hours
— Imposition of possession limits
— Reporting of suspicious items
— Addressing concerns of public safety

The Committee convened for the last time in October 2018 to take feedback from various stakeholders including existing licensees and liquor trade associations, and was in the process of finding the ideal middle ground by introducing reasonable restrictions in the larger public interest, while effectively administering new age businesses within the statutory mandate — to enforce and regulate the liquor trade without promoting it.

Decision to appeal

Prasanna says that “needless to say, we are not in agreement with the findings of the Hon’ble High Court and are positive that we stand a good chance in appeal. Our legal team is studying the implications and the scope of appeal, which we will be perusing shortly.”

He says that while there existed no regulation in the first place, HipBar set lofty standards for itself in terms of age verification, customer grievance redressal, trade parity, and high compliance with regard to delivery timing and possession limits. HipBar fulfilled 61,000+ home delivery orders with 100 percent age-verification during the period of operation from October 2017-18, and importantly, it denied delivery orders in 175 cases on account of age-related issues.

He goes on to say that “HipBar understand the burden and responsibility of taking this business digital and considered the interests of all stakeholders, including the retailers. From the data gathered from our home delivery operations of over 12 months, we can say with certainty that home delivery of alcoholic beverages within a well-monitored system will foster ‘cultured drinking’ and will help moderate drinking habits, especially amongst the youth.”

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Updated Date: Sep 24, 2019 11:46:15 IST