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Footage of two men snorting a substance ''which was not baking powder'' from a clipboard in the Powder Bar was shown to the District Licensing Committee during a hearing in Queenstown yesterday.
The April CCTV footage showed a contracted DJ and a barman on a work trial snorting the substance while behind the bar in Searle Lane, with the general manager just feet away serving customers.
Both men were ejected from the premises but police were not told until several days later.
Liquor licensing Sergeant Linda Stevens and Queenstown Lakes District Council liquor licensing inspector Jen Mitchell said it was one of several incidents which gave cause for concern over the applicant's suitability under the Sale and Supply of Alcohol Act 2012.
The Powder Room, owned by Barra Pista Ltd, was formerly known as the Mini Bar.
The new owners had been operating the bar under a temporary authority since September.
Sgt Stevens said on November 23 there was an incident in the bar, in which a naked male had bumped into another man who was dancing.
The clothed man took exception to that and punched the naked man, security intervened and police were called.
On December 10, police found the duty manager to be intoxicated while behind the bar.
She had admitted drinking three wines and a breath test found she was over the breath-alcohol limit of 400mcg.
On April 6, when Sgt Kate Pirovano visited the premises and inquired about the availability of food she was advised there was ''none there'' because the manager had ''chucked them out the day before''.
Majority shareholder and company director Rajesh Patel, a lawyer based in Sydney, said it was the first time he had been the owner of a bar and the company had taken a ''firm stance'' on actions which were ''prejudicial'' to the company and contrary to the Act.
With regard to the snorting, Mr Patel said, based on CCTV footage shown, ''it's safe to say it wasn't baking powder they were using''.
The company had ''zero tolerance'' regarding the use of illegal substances.
Mr Patel said the employee who was found intoxicated on premises while working was also fired.
With regard to the lack of food on site he said it had been ''an oversight''.
Lawyer Tanya Surrey, on behalf of the applicant, said the company's application for a substantive on-licence had been referred to the Alcohol Regulatory Licensing Authority (ARLA), but no hearing date had been set.
The company wanted to continue trading under a temporary licence until the matter had been heard by the ARLA.
''The company acknowledges that some of the issues raised by the agencies are not ideal, however, these matters are now in the past and previous temporary authorities have been issued against this background.
''It is submitted a further temporary licence should be granted for a period of three months from July 1.''
The committee, reserving its decision after yesterday's hearing, will issue its findings within a fortnight.