Auckland Hookah Bar’s Restaurant Licence Questioned | NZ Local News

The Dilruba Lounge, an Auckland establishment attempting to balance restaurant operations with a significant shisha business, is facing scrutiny from licensing authorities. The core question: is it genuinely a restaurant, or primarily a hookah bar operating under a restaurant license? The case highlights a growing tension between evolving hospitality models and the strict conditions attached to alcohol licenses in New Zealand.

The Auckland District Licensing Committee heard arguments last week regarding the renewal of Dilruba Lounge’s on-licence, which permits the sale of alcohol alongside food. Owner Parminder Shergill found himself defending the restaurant’s viability after inspectors raised concerns about the disproportionate revenue generated by shisha – flavored tobacco smoked through a hookah – compared to food sales. This isn’t a new issue; inspectors have been flagging concerns since September 2024, noting instances of alcohol service outside of permitted hours, incorrect signage, and a customer base more focused on shisha than dining.

A Disconnect Between Menu and Reality

The limited food menu at Dilruba Lounge – comprising just four main courses, four snacks, and two desserts – immediately raised red flags. Alcohol licensing inspector Anita Marsh testified that during a site visit last year, only two out of seventeen patrons were actively eating. This observation, coupled with a review of the lounge’s Instagram page, which primarily promoted shisha offerings, fueled the inspectors’ skepticism. Marsh argued that if Shergill intended to operate a business significantly different from a traditional restaurant, he should have been transparent from the outset. She stated in her report that the lounge appeared to be “knowingly operat[ing] the premises in a manner that is inconsistent with their licence,” which is specifically tied to operating as a restaurant.

Scott Evans, another licensing inspector, echoed these concerns, recalling a similar observation during the initial on-licence application in 2023. While Shergill initially presented a more comprehensive menu, he reverted to a minimal food offering once the license was granted, effectively prioritizing the shisha bar aspect of the business. Evans explicitly stated he doesn’t believe Dilruba Lounge qualifies for a restaurant-style license given its current operations. The core requirement for such a license is that the premises be “principally for supplying meals to the public for eating on the premises.”

Shergill’s Defense and the Question of Intent

Shergill, however, maintained that his intention was always to operate a restaurant alongside a shisha area. He defended his limited menu, acknowledging that other restaurants might offer superior cuisine, and suggested that customer preference simply lay elsewhere. He emphasized the significant financial investment he’s made in the business, including the restaurant infrastructure and kitchen facilities. He described the portions as “very big” and suggested he could frequently change the menu.

Interestingly, Evans conceded that Shergill’s intentions didn’t appear malicious. He proposed an alternative path: applying for an “on-licence premises – not otherwise specified.” This type of license would allow Dilruba Lounge to operate primarily as a shisha bar while still being permitted to serve alcohol. This suggests a willingness from the licensing inspectors to accommodate the business model, provided it’s operating under the correct licensing framework.

Broader Implications for Auckland’s Shisha Lounges

District Licensing Committee chairman Michael Goudie framed the Dilruba Lounge case as a cautionary example for other shisha bars in the Auckland region considering a similar dual-operation model. He clarified that operating a shisha lounge in the central business district is permissible, but emphasized the importance of adhering to the conditions stipulated in the original license application. “For us, we need to look at whether you’re meeting those conditions,” Goudie stated. The committee is now deliberating on whether to decline the current application and recommend Shergill apply for a more appropriate license within three months.

The case underscores the challenges faced by businesses attempting to navigate New Zealand’s alcohol licensing regulations. The Sale and Supply of Alcohol Act 2012 (New Zealand Legislation website) aims to balance public health and safety with the economic benefits of a vibrant hospitality sector. The Act categorizes licenses based on the primary function of the premises, and misrepresenting that function can lead to license revocation or denial.

The Financial Stakes and Potential Pathways Forward

While the specific financial impact on Dilruba Lounge remains unquantified, the loss of an on-licence would undoubtedly affect its revenue stream. Alcohol sales often represent a significant portion of revenue for restaurants and bars, and the inability to serve alcohol could deter customers. The cost of switching to a different license type – the “on-licence premises – not otherwise specified” suggested by Inspector Evans – would involve application fees and potentially adjustments to the business model.

The situation likewise highlights the potential for regulatory arbitrage, where businesses attempt to operate under licenses that don’t accurately reflect their primary activities. This can create an uneven playing field and undermine the integrity of the licensing system. The Auckland District Licensing Committee’s decision in the Dilruba Lounge case will likely set a precedent for future applications from similar establishments, potentially leading to increased scrutiny of shisha bars seeking alcohol licenses.

The committee’s deliberation is ongoing, and a decision is expected in the coming weeks. Shergill could choose to appeal the committee’s decision, potentially prolonging the legal process. Alternatively, he could proactively apply for the alternative license type suggested by the inspectors, allowing him to continue operating as a shisha bar with alcohol service. The outcome will not only determine the future of Dilruba Lounge but also shape the regulatory landscape for similar businesses in Auckland.