M/S.
Ojas Industries (P) Ltd Vs. M/S. Oudh Sugar Mills Ltd. & Others [2007] Insc 347
(2 April 2007)
DR. ARIJIT PASAYAT & S.H. KAPADIA
KAPADIA, J.
(Arising out of S.L.P. (C) No.7690 of 2006) WITH
Civil Appeal NO. 1731 of 2007 arising out of SLP(C)No.7990/06 Civil Appeal NO.
1732 of 2007 arising out of SLP(C)No.7991/06 Civil Appeal NO. 1735 of 2007
arising out of SLP(C)No.8774/06 Civil Appeal NO. 1734 of 2007 arising out of
SLP(C)No.8772/06 Civil Appeal NO. 1733 of 2007 arising out of SLP(C)No.8770/06
T.P.(C) No.421/06 T.P.(C) NO.623/06 Leave granted in petitions for special
leave.
In this batch of matters we are required to interpret Press Note No.12 dated
31.8.1998 issued by Government of India, Ministry of Industry, concerning
de-licensing of Sugar Industry.
For the sake of convenience we state the facts occurring in Civil Appeal No.
of 2007 arising out of S.L.P.(C) No.7690 of 2006 - M/s. Ojas Industries (P)
Ltd.
Versus M/s. Oudh Sugar Mills Ltd. & Others.
Proliferation of Industrial Entrepreneur Memorandums to block competition is
the cause of dispute.
On 31.8.98 Government of India (for short, 'GOI') decided to delete sugar
industry from compulsory licensing under the Industries (Development and
Regulation) Act, 1951 (For short, '1951 Act'). In that Press Note No.12, GOI
clarified that in order to avoid unhealthy competition among sugar factories to
procure sugarcane, a minimum distance of 15 KMs has to be observed between an
existing sugar mill and a new mill (factory). Further, the entrepreneur who desires
to avail of the de-licensing of sugar industry was required to file an
Industrial Entrepreneur Memorandum (for short, 'IEM') with the Ministry of
Industry. In the said Press Note it was further clarified that those
entrepreneurs who have been issued Letter of Intent (for short, 'LOI') for
manufacture of sugar need not file an initial IEM and in such cases, the LOI
Holders shall file Part 'B' only of the IEM at the time of commencement of
commercial production.
The Notification dated 11.9.98 was issued under Section 29B(1) of the said
1951 Act. It had to be read with Press Note No.12 dated 31.8.98. It was issued
to usher in the policy of de-licensing.
After de-licensing 2232 IEMs were filed till July 2005 out of which 600 IEMs
were filed in U.P.
On 13.5.04 M/s. Ojas Industries (P) Ltd. (for short, 'Ojas') filed its IEM
for setting up a sugar mill at village Baisagapur, Distt. Lakhimpur Kheri, U.P.
It was acknowledged by GOI. Ojas claims to have obtained permission for
purchase of lands under U.P. Zamidari Abolition & Land Regulation Act. It
claims to have placed orders for entire plant and machinery from M/s. S.S.
Engineers, Pune in February 2005. It claims to have placed an order of the
value of Rs.8.65 crores for construction of the factory building. It also
claims to have made financial tie-ups with banks and other financial
institutions for meeting expenses of more than Rs.20 crores. It claims to have
approached U.P. Pollution Control Board for grant of NOC dated 28.4.05. It
claims to have obtained such NOC. Ojas claims to have spent Rs.20 crores under
various Other Heads. After four days on 17.5.04, M/s. Oudh Sugar Mills Ltd.
(for short, 'Oudh') filed its IEM for setting up a sugar mill (factory) at
village Saidpur, Khurd, Distt. Lakhimpur Kheri, U.P.
within 7.2 Kms from the proposed sugar mill of Ojas in Basaigapur. This has
led to the dispute between the two companies.
On 23.4.05 Ojas filed its Writ Petition No.7123/05 before the Delhi High
Court for setting aside the IEM filed by Oudh. On 28.5.05 Oudh filed a writ
petition in Delhi High Court bearing No.9892/05 to set aside the IEM filed by
M/s. Bajaj Hindustan Ltd. for setting up the sugar mill in Titarpur.
On 30.6.2005, pursuant to the Orders of the Delhi High Court, the matter was
heard by Chief Director, Sugar, (GOI) who approved the IEM filed by Ojas. The
IEM filed by Oudh was disapproved. Aggrieved by the decisions of the Chief
Director, Sugar, (GOI), Oudh filed Writ Petition No.11748/05. On 26.7.05 Oudh
filed another Writ Petition No.12078/05 challenging the IEM of M/s. Bajaj
Hindustan Ltd. for setting up its sugar mill at village Khambarkhera.
Be that as it may, by the impugned judgment dated 22.12.05 the Division
Bench of the Delhi High Court held that the Notification dated 11.9.98 read
with the Press Note No.12 dated 31.8.98 prescribing 15 KMs distance between
existing sugar mill and a new sugar mill did not operate to the prejudice of
Oudh and that it was open to Oudh or any one else to establish a sugar mill
beyond 15 KMs of an existing sugar mill. It was held that the Central
Government had executive powers under Article 73 of the Constitution of India
to issue the said Press Note No.12. It was further held that the said Press
Note, however, applied only to cases where a new mill (factory) is proposed to
be set up within 15 KMs of an existing sugar mill. According to the impugned
judgment, therefore, in the absence of existing sugar mill the said Press Note
No.12 dated 31.8.98 had no application. On facts, it was, therefore, held that
Ojas cannot derive any benefit from the said Press Note No.12 dated 31.8.98. In
the circumstances, by the impugned judgment it has been held that the said
Press Note applies only when there is an existing sugar mill.
Accordingly, by the impugned Writ Petition No.7123/05 filed by Ojas for
setting aside the IEM filed by Oudh stood dismissed. Whereas Writ Petition
No.11748/05 filed by Oudh was allowed and the orders passed by the Chief
Director, Sugar, dated 30.6.05 was set aside.
Consequently, by the impugned judgment Writ Petition No.12078/05 filed by
Oudh challenging the IEM of M/s.
Bajaj Hindustan Ltd. for Khambarkhera was also dismissed.
Aggrieved by the impugned judgment dated 22.12.05 Ojas have come to this
Court by way of civil appeals.
Before proceeding further we may point out that in the impugned judgment
vide para '63' , the High Court observed that it was always open to the Central
Government to amend Press Note No.12 dated 31.8.98 and provide that if an IEM
is filed by one party, then the subsequent IEM for setting up a sugar mill
within 15 KMs of the place indicated by the Earlier IEM will not be
entertained. This is now precisely done by Union of India. It has issued
Sugarcane (Control) (Amendment) Order, 2006 on 10.12.06 inter alia laying down
the effective steps which the applicant is required to take.
The said Sugarcane (Control) (Amendment) Order, 2006 has inserted Clauses 6A
to 6E into Sugarcane (Control) Order, 1966. We quote hereinbelow the newly
added clauses which read as under:
"6A. Restriction on setting up of two sugar factories within the radius
of 15 Kms. Notwithstanding anything contained in clause 6, no new sugar
factory shall be set up within the radius of 15 Kms of any existing sugar
factory or another new sugar factory in a state or two or more states:
Provided that the State Government may with the prior approval of the
Central Government, where it considers necessary and expedient in public
interest, notify such minimum distance higher than 15 Kms or different minimum
distances not less than 15 Kms for different regions in their respective
States.
Explanation 1.- An existing sugar factory shall mean a sugar factory in
operation and shall also include a sugar factory that has taken all effective
steps as specified in Explanation 4 to set up a sugar factory but excludes a
sugar factory that has not carried out its crushing operations for last five
sugar seasons.
Explanation 2.- A new sugar factory shall mean a sugar factory, which is not
an existing sugar factory, but has filed the Industrial Entrepreneur Memorandum
as prescribed by the Department of Industrial Policy and Promotion, Ministry of
Commerce and Industry in the Central Government and has submitted a performance
guarantee of rupees one crore to the Chief Director (Sugar), Department of Food
and Public Distribution, Ministry of Consumer Affairs, Food and Public
Distribution for implementation of the Industrial Entrepreneur Memorandum
within the stipulated time or extended time as specified in clause 6C.
Explanation 3.- The minimum distance shall be determined as measured by the
Survey of India.
Explanation 4.- The effective steps shall mean the following steps taken by
the concerned person to implement the Industrial Entrepreneur Memorandum for
setting up of sugar factory:- (a) purchase of required land in the name of the
factory;
(b) placement of firm order for purchase of plant and machinery for the
factory and payment of requisite advance or opening of irrevocable letter of
credit with suppliers;
(c) commencement of civil work and construction of building for the factory;
(d) sanction of requisite term loans from banks or financial institutions;
(e) any other step prescribed by the Central Government, in this regard
through a notification.
6B. Requirements for filing the Industrial Entrepreneur Memorandum. (1)
Before filing the Industrial Entrepreneur Memorandum with the Central
Government, the concerned person shall obtain a certificate from the Cane
commissioner or Director (Sugar) or Specified Authority of the concerned State
Government that the distance between the site where he proposes to set up sugar
factory and adjacent existing sugar factories and new sugar factories is not
less than the minimum distance prescribed by the Central Government or the
State Government, as the case may be, and the concerned person shall file the
Industrial Entrepreneur Memorandum with the Central Government within one month
of issue of such certificate failing which validity of the certificate shall
expire.
(2) After filing the Industrial Entrepreneur Memorandum, the concerned
person shall submit a performance guarantee of rupes one crore to Chief
Director (Sugar), Department of Food and Public Distribution, Ministry of
Consumer Affairs, Food and Public Distribution within thirty days of filing the
Industrial Entrepreneur Memorandum as a surety for implementation of the
Industrial Entrepreneur Memorandum as a surety for implementation of the
Industrial Entrepreneur Memorandum within the stipulated time or extended time
as specified in clause 6C failing which Industrial Entrepreneur Memorandum
shall stand de-recognized as far as provisions of this Order are concerned.
6C Time limit to implement Industrial Entrepreneur Memorandum.- The
stipulated time for taking effective steps shall be two years and commercial
production shall commence within four years with effect from the date of filing
the Industrial Entrepreneur memorandum with the Central Government, failing
which the Industrial Entrepreneur Memorandum shall stand de- recognized as far
as provisions of this Order are concerned and the performance guarantee shall
be forfeited:
Provided that the Chief Director (Sugar), Department of Food and Public
Distribution, Ministry of Consumer Affairs, Food and Public Distribution on the
recommendation of the concerned State Government, may give extension of one
year not exceeding six months at a time, for implementing the Industrial
Entrepreneur Memorandum and commencement of commercial production thereof.
6D. Consequences of non-implementation of the provisions laid down in
clauses 6B and 6C.- If an Industrial Entrepreneur Memorandum remains
unimplemented within the time specified in clause 6C, the performance guarantee
furnished for its implementation shall be forfeited after giving the concerned
person a reasonable opportunity of being heard.
6E. Application of clauses 6B, 6C and 6D to the person whose Industrial
Entrepreneur Memorandum has already been acknowledged.- (1) Except the period
specified in sub- clause (2) of clause 6B of this Order, the other provisions
specified in clauses 6B, 6C and 6D shall also be applicable to the person whose
Industrial Entrepreneur Memorandum has already been acknowledged as on date of
this notification but who has not taken effective steps as specified in
Explanation 4 to the clause 6A.
(2) The person whose Industrial Entrepreneur Memorandum has already been
acknowledged as on date of this notification but who has not taken effective
steps as specified in Explanation 4 to the clause 6A shall furnish a
performance guarantee of rupees one crore to the Chief Director (Sugar),
Department of Food and Public Distribution, Ministry of Consumer Affairs, Food
and Public Distribution within a period of six months of issue of this
notification failing which the Industrial Entrepreneur Memorandum of the
concerned person shall stand de-recognized as far as provisions of this Order
are concerned."
Learned counsel appearing on behalf of Ojas submitted that the
interpretation placed by the Division Bench of the Delhi High Court on the
expression "existing sugar mill" in the Press Note No.12 will lead to
discrimination. In this connection, it was submitted that if in a given case
there exists a sugar mill, whose performance is poor, even then, no new sugar mill
(factory) can be set up within an area of 15 KMs thereof.
According to the learned counsel, this was not the intention while
introducing de-licensing. Learned counsel further submitted that the impugned
judgment was erroneous in interpreting the said Press Note. It was urged that
in a case, even if there is no existing sugar mill any number of sugar mills
can be set up. According to the learned counsel, such an interpretation would
not only result in discrimination under Article 14 of the Constitution of India
but it would provide protection to inefficient existing mills at the cost of
the interest of the farmers in the area. Learned counsel submitted that if the
impugned judgment is upheld then the existing sugar mills will get full
protection. They will be assured of continuous supply of sugarcane whereas the
entrepreneurs proposing to set up new sugar plants of higher capacities will
not get adequate sugarcane for their sugar mills. Learned counsel submitted
that the impugned judgment will discourage the new investments in the sugar
industry and the result would be frustration of the policy of liberalisation.
Learned counsel submitted that such an interpretation will completely desist
the entrepreneur from setting up a sugar mill in a new area.
Learned counsel submitted that the impugned judgment should not be upheld
since it would lead to disastrous consequences. In this connection, it was
submitted that according to the impugned judgment unless and until the sugar
mill becomes an existing sugar mill the said entrepreneurs shall have no
protection from business rivals who can set up sugar mills in close proximity
creating difficulties for such entrepreneurs for procurement of basic raw
material. Learned counsel submitted that under the provisions of the Sugarcane
(Control) Order, 1966 and under the provisions of U.P.
Sugarcane (Regulation of Supply and Purchase) Act, 1953, the Cane
Commissioner has been entrusted with the object of ensuring adequate supply of
sugarcane to the sugar mills. Learned counsel urged that by reason of the
impugned judgment any number of mills can be set up in close proximity to each
other which would make the demand for sugarcane much higher than its supply and
in such a situation allocation by the Cane Commissioner would become very
difficult as he would not be in a position to allocate the sugar mills adequate
cane for the mills. Learned counsel urged that under Clause 6 of the Sugarcane
(Control) Order, 1966 framed under Section 3 of the Essential
Commodities Act, 1955, the Central Government has been empowered to issue
directions for regulation, distribution and movement of sugarcane to ensure
continuous supply of sugarcane to sugar mills. In order to avoid unhealthy
competition among the sugar mills and to ensure procurement of sugar in a
systematic manner, the Central Government has been issuing Policy Directives
from time to time in the form of press note prescribing a minimum distance
between two sugar mills. In this connection, it was pointed out that a perusal
of various press notes issued by the Central Government from time to time would
show that the minimum radial distance between two sugar mills has always been
retained in the past depending upon the cane availability. Under the impugned
Press Note No.12, the stipulation was 15 KMs. Therefore, according to the
learned counsel, it was necessary to retain the minimum radial distance between
two sugar mills so that a given sugar mill having an IEM in the first instances
is assured of adequate supply of raw material.
Learned counsel submitted that reading of various Press Notes issued by GOI
shows that the distance between two sugar mills has a direct relationship with
the availability of sugarcane. Learned counsel urged that these aspects have
not been taken into account in the impugned judgment. Learned counsel submitted
that the High Court erred in holding that Press Note No.12 would apply only in
cases where there is a mill in existence (existing mill). It was submitted that
such an interpretation would lead to chaos. It was submitted that the result of
the impugned judgment would be that the sugar mills would be allowed to be set
up in close proximity leading to unhealthy competition and starvation of basic
raw material which would make the mills unviable. Learned counsel submitted
even after de-licensing it was necessary to retain the condition of radial
Distance, namely, sufficient distance between two sugar mills having nexus with
the availability of sugarcane in an area. In this connection, it was pointed
out that "Distance" has been a relevant Condition for last 20 years.
It was urged that this Condition has got to be retained even after
de-licensing. As regards IEMs, it was submitted that under Notification dated
25.7.91 issued under Section 29B of the 1951 Act, industries exempted from
de-licensing had to file IEMs. Learned counsel submitted that the same concept
has been continued even after de-licensing. Learned counsel pointed out that
after de-licensing, industrial licence was not required but the Condition of
filing IEM embodied in Notification dated 25.7.91 has been retained and,
therefore, it has legal sanctity and validity. Learned counsel, therefore,
urged that the Distance Condition should be maintained not only between
existing and proposed mill but also between two proposed mills. Learned counsel
urged that an IEM gives an entrepreneur a right to take steps for setting up a
sugar mill and without an IEM one cannot proceed to set up a sugar mill.
Therefore, according to the learned counsel, Part 'A' of the IEM was equated
with LOI and Part 'B' of IEM was equated with industrial licence in terms of
the Press Note No.12 dated 31.8.98. According to the learned counsel, the High
Court has failed to appreciate that in respect of two sugar mills, proposed to
be set up in a new area, mere filing of IEM was not sufficient but filing of
IEM coupled with the effective steps was necessary. According to the learned
counsel, IEM plus effective steps to implement such IEM, were the twin
requirements enunciated in the impugned Order passed by the Chief Director,
Sugar, which has been wrongly set aside by the High Court. Learned counsel
urged that an IEM filed first in point of time, should be given primacy over
IEM filed subsequently subject to the condition that effective steps have been
taken by the First IEM Holder within reasonable time. Learned Counsel urged
that where effective steps have been taken by the First IEM Holder, all other
IEMs filed thereafter and falling within 15 KMs from that location should be
kept in suspense and if the First IEM Holder fails to take effective steps then
priority should be given to the Second IEM Holder and so on and so forth. This,
according to the learned counsel, has not been appreciated by the Court below.
Applying the above tests to the facts of the present case, learned counsel
submitted that Ojas filed its IEM on 13.5.04 for setting up a sugar mill at
Baisagapur, it had taken effective steps to implement its IEM and, therefore,
according to the learned counsel, the Subsequent IEM filed by Oudh, should have
been declared as non est by the High Court. For the above reasons, learned
counsel submitted that the impugned judgment needs to be set aside.
On the other hand, learned counsel appearing on behalf of Oudh submitted
that prior to the Sugarcane (Control) (Amendment) Order, 2006 dated 10.11.2006,
the only restriction was with regard to Distance as contained in Press Note
No.12 dated 31.8.98. That Distance was of 15 KMs required to be maintained
between an existing sugar mill and a new sugar mill (factory). It was not from
one IEM to another IEM.
Learned counsel submitted that under Press Note No.12 in order to preclude a
new sugar mill from being set up there has to be an existing sugar mill within
15 KMs of the proposed sugar mill. It is urged, in Order, for a mill to be
regarded as an existing sugar mill, a mere IEM or effective steps to implement
such IEM were not sufficient but the mill should have become an existing sugar
mill.
Therefore, according to the learned counsel, this view taken by the Delhi
High Court was the correct interpretation of the law existing before 10.11.06.
Learned counsel urged that the Sugarcane (Control) (Amendment) Order, 2006
by which Clause 6A to 6E stood inserted in the Sugarcane (Control) Order, 1966
was not retrospective because it lays down new conditions such as filing of
bank guarantee, filing of distance certificate and also it lays down effective
steps of implementing of IEM. Therefore, according to the learned counsel, the
said Sugarcane (Control) (Amendment) Order, 2006, cannot affect the position as
it obtained before 10.11.06. In the alternative, learned counsel urged that if
this Court is of the view that the aforestated Sugarcane (Control) (Amendment)
Order, 2006 constitutes a bar for setting up new sugar mill in the sense of the
First IEM Holder taking effective steps for its implementation qua the
Subsequent IEM Holders then, according to the learned counsel, one has to
decide as to what are these effective steps and what would be the relevant date
for determining whether the effective steps have been undertaken. Learned
counsel submitted that the effective steps to be taken by the IEM Holder are
set out in Explanation 4 to Clause 6A. Learned counsel has suggested in
addition thereto certain other effective steps which an applicant should take
so that unscrupulous persons are prevented from blocking the sites. These are purchase
of minimum 50 acres of land for the factory (mill), placement of firm order for
purchase of plant and machinery for the factory, payment of requisite advance
or opening of letter of credit with suppliers, investment of at least 25 acres
on civil work, sanction of term loans from banks/financial institutions,
submission of Project Report for sugar factory with details of fund resources
and a timeframe within which effective steps should be taken failing which the
IEM would lapse.
India has adopted the policy of economic reforms, free trade and liberalization
in 1991. Government has taken several steps in that direction. The Licence Raj
has been dismantled in phases. Sugar industry is accordingly liberalized. It
has been de-licensed. The object being to increase the production of sugar. The
object being to make the sugar industry competitive in the world. The object
being continuous supply of sugarcane to the entrepreneurs proposing to set up
new sugar plants of viable capacities. The object being disciplined procurement
of sugarcane and sufficient supply of sugarcane to the mills (factories). This
last object is the basis of Press Note No.12 dated 31.8.98. If sugar mills are
allowed to be set up in close proximity then the demand of sugarcane will be
much higher than supply and in which event the existing sugar mills will be
starved of the sugarcane and will become unviable consequently the farmers will
also suffer.
Before the High Court one of the submissions made on behalf of the Oudh was
that the Notification dated 11.9.98 under Section 29B(1) of the 1951 Act read
with Press Note No.12 dated 31.8.98, did not provide for a bar for the
Subsequent IEM Holder in the face of the First IEM Holder taking effective
steps within the specified time-limit. In the impugned judgment (vide para
'65') the High Court has stated, while accepting the contention of Oudh, that
the Central Government was free to amend Press Note No.12 and provide for a bar
for Subsequent IEM Holders from setting up a sugar mill within 15 KMs of the
place where the proposed sugar mill under the Earlier IEM is proposed to be set
up. When High Court decided the matter there was no such express bar.
However, by way of Sugarcane (Control) (Amendment) Order, 2006 dated
10.11.06 a bar is introduced vide Clause 6A to 6E for setting up a new sugar
factory (mill) by a person taking effective steps after filing IEM. In other
words, if the First IEM Holder or the Earlier IEM Holder takes effective steps
to implement its IEM then the Subsequent IEM Holder cannot proceed with his
IEM.
If the First or Earlier IEM Holder completes its Projects successfully then
the Remaining IEMs for that area shall become non est. They shall, however,
remain in suspense during stipulated period when the Earlier IEM Holder takes
effective steps for implementing its IEM.
Therefore, the very basis of the impugned judgment is now eliminated. Hence,
we are not required to examine once again the validity of the said judgment.
Suffice it to state, that the Sugarcane (Control) (Amendment) Order, 2006
shall apply retrospectively to all cases, including the present cases in which
IEMs are pending. In this connection, the question which arises for
determination is : firstly, whether the Sugarcane (Control) (Amendment) Order,
2006 operates retrospectively and if so whether the effective steps enumerated
in Explanation 4 to Clause 6A are adequate.
In this connection, we have to keep in mind the conceptual difference
between the distance certificate, the concept of effective steps to be taken by
an IEM Holder and the question of bona fides. Sugarcane (Control) (Amendment)
Order, 2006 inserts Clauses 6A to 6E in Clause 6 of the Sugarcane (Control)
Order, 1966.
It retains the concept of "Distance". This concept of
"Distance" has got to be retained for economic reasons.
This concept is based on demand and supply. This concept has to be retained
because the resource, namely, sugarcane, is limited. Sugarcane is not an
unlimited resource. "Distance" stands for available quantity of
sugarcane to be supplied by the farmer to the sugar mill.
On the other hand, filing of bank guarantee for Rs.1 crore is only as a
matter of proof of bona fides. An entrepreneur who has genuinely interested in
setting up a sugar mill has to prove his bona fides by giving bank guarantee of
Rs.1 crore. Further, giving of bank guarantee is also a proof that the
businessman has the financial ability to set up a sugar mill (factory).
Therefore, giving of bank guarantee has nothing to do with the Distance
Certificate. As far as effective steps are concerned we may point out that
apart from the steps enlisted in the earlier Notification dated 11.9.98 read
with Press Note No.12 dated 31.8.98, the Sugarcane (Control) (Amendment) Order,
2006 has laid down such steps like purchase of required land in the name of the
factory (mill), placement of a firm order for purchase of plant and machinery
for the factory, payment of advance or opening of letter of credit with
suppliers, commencement certificate of civil work and construction of building,
sanction of requisite term loans from the banks or financial institutions and
any other step prescribed by the Central Government in this regard. In our view
Clauses 6A to 6E have been introduced in Clause 6 of Sugarcane (Control) Order,
1966. In our view Clauses 6A to 6E are clarificatory in nature. There are
certain norms mentioned in the Accounting Standards of Institute of Chartered
Accountants for setting up industries. They may be sugar mills, paper mills,
textile mills etc. When effective steps are enlisted in Sugarcane (Control) (Amendment)
Order, 2006 dated 10.11.06 vide Explanation 4 to Clause 6A those in-built norms
are made explicit, therefore, Explanation 4 to Clause 6A is clarificatory.
Therefore, it is retrospective. There is one more reason why we hold that the
Sugarcane (Control) (Amendment) Order, 2006 is retrospective. The Central
Government has taken note of various pending matters in different courts on the
interpretation of Sugarcane (Control) Order, 1966, Press Note No.12 and the
Notification dated 11.9.98 issued under Section 29B(1) of the said 1951 Act to
put an end to litigations and keeping in mind the concept of "Distance
Certificate" as distinct from the concept of "effective steps",
the Central Government has issued the Sugarcane (Control) (Amendment) Order,
2006. It is to plug the loophole that the said Order has been issued on
10.11.06. In our view, therefore, the Sugarcane (Control) (Amendment) Order,
2006 is retrospective. In all pending cases the Central Government now seeks to
put a bar for setting up new sugar factory (mill) for a limited period during
which the Former or Earlier IEM Holder is required to take effective steps. The
said Order of 2006 is not putting a ban on setting up of new units. It is only
giving a priority in the matter of setting up of new units. Therefore, the said
2006 Order operates retrospectively. It will not apply to mills which are
already functioning. The said 2006 Order will apply only to cases where IEMs
are pending in disputes in various courts. The said 2006 Order will also apply
after our judgment to those cases which are under dispute and where milling has
not commenced or permitted to commence. On behalf of Ojas certain suggested
modifications to Explanation 4 in Clause 6A have been indicated. They are
stated hereinabove. They are worthy of considerations by the Central
Government.
It is for the Central Government to incorporate such modifications as it
deems fit keeping in mind the availability of sugarcane in a given area, the
crushing capacity of the unit, the installed capacity of the plant and
machinery, the nexus with the availability of sugarcane and the capacity
utilization of the mill (factory). Before concluding on this issue we may
reiterate that raising of resources and application of resources by a unit is
different from the Condition of Distance. The concept of "Distance"
is different from the concept of "setting up of unit" in the sense
that setting up of a unit is the main concern of the businessman whereas a
concept of "Distance" is an economic concept which has to be taken
into account by the Government because it is the Government which has to frame
economic policies and which has to take into account factors such as demand and
supply.
I.A.No.2 of 2007 in T.P.(C) No.421 This I.A. pertains to matters pending in
Allahabad High Court (Lucknow Bench). I.A. No.2 of 2007 has been filed by M/s.
Balrampur Chini Mills Ltd. (for short, 'Balrampur'). It is for grant of milling
permission to its factory at Kumbhi, Distt. Lakhimpur Kheri (U.P.), which is
complete. It is submitted on behalf of Balrampur that the sugarcane crushing
season continuous upto 15th May every year. The factory is ready to start
milling. Even a Cane Reservation Order has been made in its favour.
The factory (mill) is ready. Balrampur has made a huge investment of Rs.213
crores. According to Balrampur, the IEM of Ojas is filed for Bhogotipur, only
in order to block the IEM filed by Balrampur. Therefore, they pray that milling
permission should be granted to Balrampur and that this Court should permit
them to obtain and implement such milling permission. According to Balrampur,
this Court should grant such permission as it would be in the interest of cane
growers, shareholders and general public. According to Balrampur no prejudice
will be caused to Ojas if they are given such milling permission. According to
Balrampur, they are setting up two mills in Kumbhi and Guleria and if Ojas is
unable to set up two mills in Bhagotipur and in Bijuwa which are within 15 KMs.
from Kumbhi and Guleria respectively, then they can still go ahead and set up
other mills in Distt. Lakhimpur and, therefore, no prejudice will be caused to
Ojas. Balrampur claims to have spent 213 crores at Kumbhi and 152 crores at
Guleria. The Kumbhi unit is complete. It is ready for milling activity.
On behalf of Ojas it has been vehemently argued that Balrampur took the risk
of making investment in the Kumbhi and Guleria Projects despite pendency of
matters in the High Courts. It is urged that by interim orders Balrampur was
put to notice that they are free to implement their above two Projects at
Kumbhi and Guleria subject to the outcome of the pending writ petitions. It is
urged that due to deference to the courts, Ojas did not proceed further for
implementation of their programme whereas Balrampur has proceeded to implement
their Projects at Kumbhi and Guleria at their own risk and, therefore, they
should not be allowed to take advantage of fait accompli.
We are of the view that out of two Projects at Kumbhi and Guleria, Balrampur
can be given milling permission for its factory (mill) at Kumbhi. In our
present judgment we have taken the view that the Sugarcane (Control)
(Amendment) Order, 2006 operates retrospectively. We have also taken the view
that in applying the said 2006 Order there will be a bar on Subsequent IEM
Holders during the specified period when the Earlier IEM Holder is taking
effective steps. At the same time, we find that in the case of Kumbhi
substantial investment has been made by Balrampur.
Their Projections are better than Units proposed to be set up by Oudh.
Moreover, the sugarcane crushing season ends on 15th May, 2007, we do not want
the cane growers to suffer. Therefore, we grant milling permission only to
Kumbhi Project. I.A. No.2 of 2007 is made absolute.
However, Guleria Project shall be governed by the principles laid down in
this judgment, as indicated above.
TO SUM UP:
We hold that the Sugarcane (Control) (Amendment) Order, 2006 imposes a bar
on the Subsequent IEM Holders in the matter of setting up of new sugar mills
(factories) during the stipulated period given to the Earlier IEM Holders to
take effective steps enumerated in Explanation 4 to Clause 6A of the Sugarcane
(Control) (Amendment) Order, 2006 dated 10.11.2006. We further hold that the
said 2006 Order operates retrospectively.
We have cleared the Kumbhi Project. All other Projects falling in various
writ petitions in the Allahabad High Court (Lucknow Bench) will be decided by
the High Court in accordance with the principles laid down in this judgment.
All civil appeals, transfer petitions and interlocutory applications
accordingly stand disposed of with no order as to costs.
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