In his letter, a copy of which was released here, Chandy protested against the AG's action and said his reasoning that he was not appearing against the Union government was not "morally and legally correct".
Rohatgi had claimed that the bar owners were his clients earlier and that he had got the permission of the Union government for appearing for the bar hotel owners, and it had been upheld by Union Law Minister Sadananda Gowda.
"The Union government has got the responsibility to defend and protect the policy of the state government and in this case the position taken by the Kerala government is in accordance with the Directive Principles of State Policy enshrined in Article 47 of our Constitution," Chandy said.
"If the bar owners were his (AGI)'s client earlier, before assuming the office of AGI, Rohatgi should have relinquished from that commitment.
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"I strongly protest the decision of AGI to appear against the state of Kerala while he is holding the office of AGI," Chandy said.
The bar owners had approached the apex court challenging the Kerala High Court verdict upholding the state's liquor policy as per which bars will be permitted in only five star hotels.
The presence of AG in the case had triggered a debate in the state as the topmost legal officer of the Centre was appearing for bar owners against the state's liquor policy.
Chandy had earlier urged Modi to ensure that when the case is taken up before the Supreme Court bench at its next sitting on July 28, this should not be repeated by the AG under any circumstances.