Shree Renuka Sugars ... v. Union Of India, Mini...

CASES REFERREDAT PARAS1. Civil Writ Petitioner No. 31199/2005 Kisan Sahakari Chini Mills Ltd. v. Union of India(Ref) 262. Civil Writ Petition No. 12078/2005 Oudh Sugar Mills Ltd. v. Union of India(Ref) 263. (2007) (9) SCC 43 Balrampur Chini Mills Ltd. v. Ojas Industries Pvt. Ltd.(Ref) 274. (2007) 4 SCC 723 Ojas Industries (P) Ltd. v. Oudh Sugar Mills Ltd.(Ref) 295. AIR 1971 SC 246 The Nagar Rice Flour Mill v. N. Teekappa Gowda(Ref) 56

6. AIR 1967 SC 509 (V 54 C 105) Commissioner of Wealth Tax, Madras v. Ramaraju Surgical Cotton Mills Ltd.(Ref) 847. (2006) 1 SCC 54 Kabini Kabini Minerals (P) Ltd. v. State of Orissa(Ref) 858. 1994 INDLAW SC 2100 State of Karnataka v. Shankar Textiles Mills Limited(Ref) 989. AIR 2006 SC 871 Dresser Rand S.A v. Bindal Agro Chem, Ltd.(Ref) 10510. AIR 1972 SC 689 The Assitant Collector of Customs and Superintendent, Preventive Service Customs, Calcutta v. Charan Das Malhotra(Ref) 15611. AIR 1983 SC 303 Dalchand v. Municipal Corporation, Bhopal(Ref) 156

12. Civil Appeal Nos. 1878-1880/2004 with Civil Appeal No. 1631/2001 and Civil Appeal Nos. 568-569/2009 decided on 18th November 2010 Commercial of Central Exicise, New Delhi v. Hari Chand Shri Gopal(Ref) 15713. AIR 1961 SC 882 Mahanth Ram Das v. Ganga Das.) 15914. (2002) 1 CALLT 278 (HC) Lila Deb Chowdhury v. State of West Bengal(Ref) 16015. 1993 (1) ALT 522 Mohd. Safdar Shareef & Others… v. Mohammed Ali & Another…(Ref) 16116. 2007 (4) CHN 705 Achintya Ghosh v. State Of West Bengal & Ors.(Ref) 162

17. (1996) 6 Supreme Court Cases 464 M.I Builders Pvt. Ltd. v. Radhey Shyam Sahu(Ref) 16418. 1995 (6) SCC 127, 139 Pleasant Stay Hotel v. Palani Hills Conservation Council(Ref) 16519. 1995 Supp. (4) SCC 595, 596 Cantonment Board, Jabalpur v. S.N Avasthi(Ref) 16620. 1991 (3) SCC 341 Pratibha Co-operative Housing Society Ltd. v. State of Maharashtra(Ref) 16721. 1995 (5) SCC 762 Dr. G.N Khajuria v. Delhi Development Authority(Ref) 168

22. 1985 (2) Supreme Court Cases 670 Daman Singh v. State of Punjbab(Ref) 17523. 2010 (3) SCC 402 State of Uttaranchal v. Balwant Singh Chaufal(Ref) 18124. (2007) 14 SCC 281 Apex Court in Holicow Pictures (P) Ltd. v. Prem Chandra Mishra(Ref) 18425. (2011) 1 SCC 640 Bajaj Hindustan Ltd. v. Sri Shadi Lal Enterprises Ltd.(Ref) 19426. (1996) 5 SCC 281 Indian Council for Enviro-Legal Action v. Union of India(Ref) 206

Sri K.G Raghavan, Senior Advocate for Sri Prashant R. Goudar & Sri Veeresh R Budihal, Advocate for Petitioners; in W.P No. 64254/2010 Sri Pramod, CGSC, For R1-3 & 7, Sri Veda Murthy, GA for R4 & 5, Sri S. Vijaya Shankar Senior Advocate for Sri Anand M. Sholapurmath, Advocate for R6;

Prof. Raviverma Kumar Senior Advocate for M/S B.B Patil and Associates for Petitioners; in W.P No 66903-66907 & 66926-66935/2010, Sri B. Papegowda, CGSC for R1-R3 & R6; Sri T.K Veda Murthy, GA for R4 & R5, Sri M.R Naik, Senior Advocate for Sri Anand M. Sholapurmath, Advocate for R7, R8-16;

Sri S.S Naganand, Senior Counsel for Sri Shridhar Prabhu Associates for Petitioners; in W.P No. 66920/2010 & 66972-66990/2010 Sri Madhusudhan R Naik, Senior Counsel for Sri Anand M. Sholapurmath, Advocate for R7; Sri Gangadhar Hosakeri, Advocate for R1-3; R6 served

Sri D.N Nanjunda Reddy, Senior Advocate for Reuben Jacob & D.P Mahesh, Advocate for Petitioners; in W.P No. 37143/2010 Sri B.V Acharya, Senior Counsel for Sri Anand M. Sholapurmath for R17; Sri Madhusudhan Naik, Advocate for R18, Assistant Solicitor General for R1 to R3, Sri Ashok Harnahalli, AG, for State, Sri T.K Veda Murthy, HCGP for R4-9, Sri D. Nagaraj, Advocate for R15 and 16, Sri G. Balakrishna Shastry, Advocate for R10-14;

N. Kumar, J.:—

All these Writ Petitions are listed before this Bench by a Special Order of the Hon'ble Chief Justice for decision. The subject matter of all these petitions is identical though one of the writ petition is by way of public interest litigation. Therefore, they are taken up for consideration together and disposed of by this common order.

2. The petitioners in W.P No. 66920/2010 herein are the member shareholders of the Doodhganga Krishna Sahakari Sakkare Karkhane Niyamit, Chikkodi. It is a Co-operative sugar factory registered under the Karnataka Co-operative Societies Act, 1959. It was established to cater to the needs of the sugarcane farmers in and around Chikkodi, Raibagh and Athani Taluk in Belgaum District Later it was converted into a Multi-State Co-operative Society under the Karnataka Multi State Co-operative Societies Act, 2002, by extending its area of operation to more than one State (Karnataka & Maharastra) Earlier, they were having crushing capacity of 2500 TCD with 13 MW Co-generation Power Plant and 40 KL Distillery. The crushing capacity of Co-generation power production was also increased to 23 MW. Thus, they have established an integrated, unique co-operative sugar factory with the total investment of more than Rs. 300 Crores. On 31-8-1998 the Government has completely de-licenced the sugar industry with effect from 14-9-1998 wherein the concept of filing of IEM with the Secretariat of Industrial Assistance in Ministry of Industry, Government of India has been introduced. Prior to the issuance of Press Note No. 12 dated 14-9-1998 the minimum radial distance between two sugar factories for the first time was fixed at 30 Kilometers during the Sixth Five Year Plan vide Press Note No. 7/1984. This was increased to 40 Kilometers during the Seventh Five Year Plan vide Press Note No. 1 (1989 series) dated 2-1-1987. The distance was reduced to 25 Kilometers on fulfillment of certain conditions vide Press Note No. 12/1989 dated 19-5-1989. Again vide Press Note No. 16/1991 dated 8-11-1991 the distance between proposed and existing sugar factories was down to 25 kilometers with the stipulation of reduction to 15 Kilometers in special cases where the cane availability is justified. This was further reduced to 15 Kilometers by Press Note No. 1/1997 dated 10-1-1997. The Central Government in exercise of powers conferred on it by Section 3 of Essential Commodities Act, 1965, and by virtue of an amendment dated 10-11-2006 inserted Clause 6A, 6B, 6C, 6D, and 6E in the Sugarcane (Control) Order 1966 by virtue of which it had imposed clear restriction on setting up of two sugar factories within the radius of 15 Kilometers and thus there is clear prohibition of setting up of a sugar factory within the radius of 15 Kilometers from an existing sugar factory.

3. Respondent No. 7 namely M/s. Shivshakathi Sugars Limited., is trying to set up a sugar factory within 15 Kilometers radius from the existing Doodhganga Krishna Sahakar Sakkate Karkhane Niyamit, Chikkodi, a existing sugar factory. The 7th respondent filed an DEM for setting up of a sugar factory in Village Saundatti Raibag Taluka, Belgaum District, on 8-6-2006. Respondent No. 7 cannot set up or barred from setting up of sugar factory within the 15 Kilometers radius from the existing Doodhganga Krishna Sahakar Sakkare Karkhane Sugar factory. The proposed site of respondent No. 7 at Saundatti Village is situated within 15 kilometers radius of the petitioners' factory. They have produced a map issued by the Department of Public Works, Ports & Inland Water Transports, Government of Karnataka to substantiate the same. The 7 respondent by furnishing false details appears to have obtained distance certificate. Respondent No. 7 had already failed to take any of the effective steps for the commencement of the commercial production till this date. Therefore, the time limit prescribed under the provisions of the Sugarcane (Control) Order for taking steps has lapsed resulting in de-recognition of IEM filed by respondent No. 7. Respondent No. 2 has already issued a show cause notice to respondent No. 7 on 27 April, 2010 and sought an explanation for cancelling and derecognizing the IEM of respondent No. 7. The second respondent ought to have re-recognized the IEM filed by respondent No. 7 and forfeited the performance guarantee furnished by respondent No. 7 and ought to have declared that the IEM of respondent No. 7 as lapsed. The petitioners being aggrieved by the failure of respondent No. 2 in de-recognizing the IEM filed by respondent No. 7 are constrained to approach this Court by way of writ petition. Therefore, they sought for declaration that the IEM filed by respondent No. 7 dated 8-6-2006 is null and void and the same has been lapsed and de-recognized in law and for a direction directing respondents 1 to 6 not to allow respondent No. 7 from setting up of a sugar factory within 15 Kilometers radius from the petitioners' factory.

4. The petitioners in W.P No. 66920/2010 have filed an application for amendment of the writ petition oh 05.03.2010 The additional facts sought to be pleaded is that the Shivashakti Sugars Limited is factually establishing the factory at Yadrav Village of Raibag Taluk and not in Saundatti Village of Raibag Taluk. It is evident from the ‘No Objection Certificate’ issued by Diggewadi Village Panchayath, which is having jurisdiction over the Yadrav Village and has set out the survey numbers situated at Yadrav Village, where the factory is proposed to be set up.

5. They contend that the distance between the Shivashakti Sugars Limited and the petitioner's factory is within the radius of 15 kms from both Yadrav Village and Saundatti Village, which is prohibited under law. The said ‘No Objection Certificate’ is of no consequence in law as specific permission under Section 64 read with 66 of the Karnataka Panchayath Raj Act, 1993 read with the Karnataka Panchayath Raj (Gram Panchayaths Control Over Erection of Buildings) Rules, 1994 is the requirement of law. The show cause notice dated 27 April 2010 issued by the 1st respondent is itself bad in law since there is no provision in law to issue a notice for an IEM, which is already dead in law. Shivashakti Sugars Limited has not brought to the notice the further extension granted by the 2nd respondent by the letter No. 25 dated 1 December 2010. The IEM was filed by the Shivashakti Sugars Limited on 8 June 2006 and in terms of the Clause 6C of the Sugar Cane (Control Amendment) Order, 2006, effective steps ought to have taken on or before 7 June 2008 and commercial production ought to have commenced within four years i.e, on or before 7 June 2010. Admittedly, there being no such compliance from Shivashakti Sugars Limited, the IEM granted in favour of Shivashakti Sugars Limited stood lapsed on 07 June 2008. Once the IEM stood lapsed, the 1 respondent has no authority in law to extend the time period of a lapsed IEM. It is settled proposition in law that a dead instrument cannot be infused with fresh lease of life for the dead instrument would have been a nullity in law on the very day it lapsed. Therefore, the contention of Shivashakti Sugars Limited that the IEM has been extended on various dates is untenable and bad in law. At any rate, the extension purportedly given to the Shivashakti Sugars Limited is in respect of establishment of a factory at Saundatti Village and not for Yadrav Village wherein the factory construction is being carried out. There is no provision in law to grant an extension beyond two years. The OC granted to the Shivashakti Sugars is in respect of the Saundatti Village and the factory is being established in Yadrav Village. The authorities have not even bothered to verify the location and have granted the approval without following the due process of law. The additional prayer sought for was for quashing the extension granted by the order dated 1 December 2010 and also for quashing the Environment Clearance Certificate issued on 28 December 2010.

6. The petitioners in W.P No. 66903/2010 are the members and share holders of Raibag Sahakari Sakkare Karkhane Niyamit (for short hereinafter referred to as “RSSKN”), which is a society registered under the provisions of the Karnataka Co-operative Societies Act, 1959. The total strength of the shareholders of the said factory is 8,903 and the primary objects of the Society was establishment of a Sugar Factory, production of sugar and further establishment of down stream unit like co-generation, power plant and distillery. The society is having 50 thousand cane grower farmer members in and around Raibag Taluk of Belgaum District. The Sugar Factory commenced its production in the year 1978 with a capacity of 1250 TCD and later in the year 1992-93, the capacity was increased to 2500 TCD.

7. Due to financial crisis, the Sugar Factory stopped its crushing operations since 2004-05. The Government of Karnataka passed an order to lease out the Sugar Factory on LROT basis for a period of 30 years and invited bids from the prospective bidders for taking a lease of RSSKN with a condition to expand the crushing capacity from 2500 TCD to 5000 TCD by investing an amount to the tune of Rs. 220 crores. Shree Renuka Sugars Limited was awarded the said lease for a period of 30 years on LROT basis. The lessee has entered into an agreement of lease vide lease deed dated 16.10.2008 by depositing an amount of Rs. 30 crores on 15.10.2008 towards the lease rent for the first year. They have further deposited a sum of Rs. 28 crores in furtherance of the order passed by this Hon'ble Court in the writ petition at the time of modifying the interim order already granted. The Shivashakti Sugars Limited and other neighbouring Sugar Factories wanted to see to it that RSSKN should not commence crushing operations continuously for more than 5 years so as to enable them to establish and start their own Sugar Factory within the radius of 15 kms, which fact is evident from the fact that writ petitions bearing W.P Nos. 2375-88/2009 were filed to thwart the process of rehabilitation and restarting of the RSSKN. But, all their efforts to stall the process of rehabilitation of the RSSKN turned futile and the RSSKN commenced its crushing operations.

8. Shivashakti Sugars Limited has left no stone unturned to see to it that the RSSKN, becomes defunct, so that the entire cane grown in the command area of RSSKN could be crushed by them. It is contended that the very fact that Shivashakti Sugars Limited objected to the commencement of the crushing by M/s. Renuka Sugars Limited and when the learned Single Judge of this Hon'ble Court has modified the interim order by permitting the said M/s. Renuka Sugars Limited to commence the crushing subject to certain conditions by virtue of the order dated 06.08.2009 in the above said writ petition. Shiva Shakthi Sugars Limited challenged the said order in W.A No. 3105/2009, stands testimony to the averment made by the petitioners.

9. As the RSSKN was tiding through severe crisis and as a matter of fact, being under liquidation, they were not crushing cane. Respondent No. 5 temporarily allocated 20 villages to the Shivashakti Sugars Limited by passing the Karnataka Sugar Cane (Regulation and Distribution) M/s. Shivashakti Sugars Limited on 04.08.2007 under the name of Governor of Karnataka, by withdrawing the said 14 villages from RSSKN only on a temporary basis.

10. The Shivashakti Sugars Limited is trying to establish a sugar factory within a radius of 15 kms from the RSSKN by furnishing false and fabricated documents and particulars and very strangely, the respondents have also granted the same, which is in utter breach and violation of the requirements of the Sugar Cane Control Order and the ratio laid down by the Hon'ble Supreme Court of India. The IEM of Shivashakti Sugars Limited is illegal and it is arbitrarily granted to them to start a new Sugar Factory proposed to be set up by the Shivashakti Sugars Limited as it is situated within less than 15 kms. The certificate issued to that effect by the Department of Public Works, Ports and Inland Water Transports, dated 28.07.2009 is enclosed.

11. The petitioners who are the members of RSSKN and whose livelihood depends upon the crushing of cane by RSSKN, caused a representation to be made to the authorities concerned to do the needful. The respondents have failed to take any action and hence aggrieved by the grant of IEM dated 08.06.2006 by the respondent No. 3 to Shivashakti Sugars Limited and further aggrieved by the State to take any appropriate action, they have preferred this writ petition by setting out several grounds pointing out how the IEM of the Shivashakti Sugars Limited is illegal and void and seeking for quashing of the same. After the respondents filed their statement of objections, the petitioners have filed a rejoinder.

12. The petitioner in W.P 64254/2010 Shree Renuka Sugars Limited is a public limited company incorporated under the Companies Act. It is an integrated manufacturing company with strategic focus on sugar and its allied products in power and ethanol, having its registered office in Belgaum, Karnataka and Corporate Office at Mumbai.

13. They state that RSSKN was liquidated by virtue of order dated 24.01.2004 by the Commissioner for Cane Development and Director of Sugar in Karnataka. The Cabinet Sub-Committee recommended the sale of the said Karkhane and by virtue of the order dated 26.06.2006 and 27.06.2006, the State Government withdrew its decision to sell the assets of the factory and was further pleased to decide to revive the said factory by leasing out In terms of the decision, the State of Karnataka called for bids and the petitioner was awarded the said lease for a period of 30 years on LROT basis, which was challenged before the Hon'ble High Court of Karnataka, which came to be rejected. Subsequently, on 16.10.2008, a registered lease deed came to be executed in their favour. The 6 respondent in the said writ petition i.e Shivashakti Sugars Limited is also a company registered under the provisions of the Companies Act, 1956. They have filed IEM for setting up of a Sugar Factory in Saundatti Village of Raibag Taluk, Belgaum District. The Competent Authority had issued an IEM on 08.06.2006 The IEM dated 08.06.2006 stood lapsed for the Mure of the Shivashakti Sugars Limited to take effective steps enumerated under Clause 6A Explanation 4 of the Order. The IEM stood derecognized by the operation of law.

14. The 5 respondent has passed an order on 04.08.2007 temporarily allocating 20 villages to Shivashakti Sugars Limited. Out of the 20 villages, 14 villages were earlier allocated to RSSKN. The 4 respondent had issued a Distance Certificate without scientific study and has forwarded the same to the 2 respondent certifying that the radial distance between the sugar factory proposed to be established by the Shivashakti Sugars Limited and the existing adjacent sugar factories is more than 15 kms. The said certificate is based only on Topo Maps and without verifying the correctness of the positions of the sites has issued the Distance Certificate dated 16.07.2007 The actual distance is less than 15 kms and in support of their case, they have produced a certificate issued by the Department of Public Works, Ports & Inland Water Transports, dated 28.07.2009 The petitioner have also addressed a letter to the 4 respondent to restore the Cane Command Area as originally allotted to RSSKN by withdrawing the said 14 villages allotted to Shivashakti Sugars Limited. RSSKN has been leased by the Government to the petitioner with a condition to expand the crushing capacity from 2500 TCD to 3500 TCD and further to establish 21 MW co-generation plant and 45KL distillery at the factory premises and the failure to reallocate the villages amounts to the abdication of power by the State.

15. Shivashakti Sugars Limited has not taken any effective steps. They have failed to purchase and procure the required land in the name of the Company or the factory, and has not at all commenced the construction or civil work for the factory. They have failed to commence the commercial production till date. The time limit as prescribed under Clause 6C of the Sugar Cane Control Order for taking effective steps has lapsed, as a result of which the IEM filed by Shivashakti Sugars Limited stood derecognised on 07.06.2010 No extension of time has been provided to the Shivashakti Sugars Limited. Therefore, the authorities ought to have exercised the powers under Clause 6D and forfeit the performance guarantee furnished by the Shivashakti Sugars Limited and ought to have declared that the IEM of the Shivashakti Sugars Limited has lapsed and restored the villages to the petitioner. The authorities failed to restore the villages to the petitioner. Therefore, they have preferred the writ petition seeking declaration that IEM dated 08.06.2006 stood lapsed and derecognized by law and for a direction to reallocate and restore the villages to the petitioner that were originally allocated to RSSKN and for other consequential reliefs. In the petition filed by the farmers, it was pleaded that the crushing operations stopped in the years 2004-05.

16. The petition in W.P No. 37143/2010 is filed on 26 November 2010. It is filed as a Public Interest Litigation by the petitioners who are the permanent resident of Yadrav Village of Raibag Taluk in Belgaum District. Their grievance is that the respondent No. 17 in the said petition which is Shivashakti Sugars Limited, a body corporate, promoted by respondent No. 18, obtained an IEM dated 08.06.2006 from the respondent No. 3 to set up a Sugar Factory by representing the place of establishment as village Saundatti in Raibag Taluk of Belgaum District. The Company has all along represented to various authorities in State and Central Government that they intend to establish a Sugar Factory with co-generation power plant in Saundatti Village of Raibag Taluk. The Company has not filed any IEM for setting up of a Sugar Factory in Yadrav Village of Raibag Taluk. The Company is in the thick of establishing a Sugar Factory at Yadrav Village, for which they do not have an IEM, a very fundamental pre-requisite under the Sugar Cane (Control) Order. The said act of the Company to establish a Sugar Factory at the place for which it does not hold an IEM is a clear violation of the existing law in that respect. This is only one of the several glaring and brazen violations of provisions of the law of the land. The Company in its bid to obtain IEM, has very conveniently and deliberately suppressed the most important fact that the distance between two existing Sugar Factory i.e RSSKN, Bhavachi, Raibag Taluk and Shri. Doodhganga Krishna Sahakari Sakkare Karkhane Niyamit, Chikodi and the proposed Sugar Factory of the Company is less than 15 kms, which is violative of the provisions of Clause 6A of the Sugar Cane (Control) (Amendment) Order.

17. Raibag Taluk comprises of 33 village Panchayaths and among them, Yadrav Village comes under Diggewadi Gram Panchayat in Raibag Taluk. The said Diggewadi Gram Panchayath comprises of 3 villages including Yadrav. The Company is setting up the factory in question by indulging in several other equally glaring and brazen violations of provisions of law, like

a. Essential Commodities Act, 1955

b. Sugar Cane (Control) (Amendment) Order 2006,

c. Water (Prevention & Control of Pollution) Act, 1974,

d. The Karnataka Panchayat Raj Act, 1993,

e. Air (Prevention & Control of Pollution) Act, 1981

f. Karnataka Land Reforms Act, 1961 and

g. Karnataka Land Revenue Act, 1964

They have clearly set out in tabular column, the various violations of law indulged in by the Company and in collusion with respondents 1 to 15, its repercussions etc., are as under:—

WHAT WAS REQUIRED TO BE DONE UNDER THE LAW BY COMPANYWHAT RESP. No. PRESENTLY DOINGWHAT IT AMOUNTS IN THE EYES OF LAWPROCEDURE REQUIRED TO BE FOLLOWED BY THE STATUTORY AUTHORITIESREPERCUSSIONSOught to have obtained permission of the conerned Gram Panchayat under Section 64 & 66 of Karnataka Panchayat Raj Act, 1993, before erecting the building and constructing of the sugar factory.Setting up an illegal construction of the sugar factory, without obtaining the permission from the concerned Gram Panchayat. (i.e from Resp. No. 12, 13 & 14)It is clear violation of Sections 64 & 66 of the Karnataka Panchayat Raj Act, 1993.The PDO/Secy, Gram Panchayat, Diggewadi & Saundatti should have initiated action under Sec. 64(3)& Sec. 296 R/W Sec. 298 of the ActIt amounts abdication of power and authority by the PDO/Secretary Gram Panchayat Diggewadi/Soundatti.

Ought to have obtained the permission of Karnataka State Pollution Control Board u/s 25 of Water (Prevention & Control of Pollution) Act, 1974 before starting the establishing of Sugar factory.Setting up an illegal construction of the sugar factory, without obtaining the permission from the Karnataka State Pollution Control Board.It amounts to a violation of Sections 42(g), 44 R/W 47 of Water (Prevention & Control of Pollution Act, 1974.The KSPCB ought have initiated action for the said violation u/s 49(1)(a)of the Act.Water bodies and other sources of water, including ground water, are being contaminated by construction material & untreated waste generated by the factory in future poses further threat to them, resulting in alluvial and fertile lands being subjected to reckless exploitation of a point of no return.Ought to have obtained the permission of KSPCB under Sec. 21 of Air (Prevention & Control of Pollution) Act, 1981 for establishment of sugar factory.Setting up an illegal construction of the sugar factory, without obtaining the permission from the KSPCB u/s 21 of Air (Prevention & Control of Pollution) Act, 1981.It amounts an offence under Section 37, 38(g) R/W Sec. 40 of the Air (Prevention & Control of Pollution) Act, 1981.The KSPCB ought have initiated action for the violation u/s 43(1)(a)of the Act.Air is being polluted by particulate cement and asbestos matters. Even benevolent earth, which gives so much and produces food, is being adversely affected.

Ought to have obtained the permission of the Deputy Commissioner Belgaum, for the change in the land user u/s 95 of Karnataka Land Revenue Act, 1964.Setting up an illegal construction of the sugar factory, without obtaining the permission from the Deputy Commissioner, Belgaum, for change in the land user.Its clear violation of prohibition contained in section 79B (1)(b)(ii)of Karnataka Land Reforms Act, 1961.The Deputy Commissioner ought to have ordered for eviction of the occupant and forfeited the land by initiating action under Sec. 96 of Karnataka Land Revenue Act, 1964 and further directed his subordinates to investigate u/s 79B(3) of Karnataka Land Reforms Act, 1961 for vesting of a land in the State Government.It amounts abdication of power and authority by the Deputy Commissioner and his subordinates, thus emboldening unscrupulous elements to get way with an audacious violation of law.Ought to have obtained IEM from the Secretariat for Industrial Assistance, Ministry of Commerce & Industry, Govt of India, under Sugarcane (Control) (Amendment) Order 2006.Setting up an illegal construction of the sugar factory, without obtaining the IEM in violation of Clause 6A of Sugarcane (Control) (Amendment) Order 2006 and in violation of order made under Sec. 3 of Essential Commodities Act, 1955.It amounts an offence u/s 7, 8, 9 and 10 of the Essential Commodities Act, 1955.The authorized officer ought to have initiated criminal proceedings u/s 10A and 11 of EC Act, 1955.It is nothing but defeating the very purpose of the Act, for which it is enacted, i.e passing Sugarcane (Control) Order, 1966 in exercise of powers under Sec. 3 of Essential Commodities Act, 1955.

18. The above noted violations of binding statutory provisions under the very nose of the State and its instrumentalities, to which they have turned a blind eye, reflect a sorry abdication of power and authority by them. As a consequence of such abdication of statutory and constitutional responsibility by the State, ordinary citizens and their constitutional right to dignified existence, as enunciated by and forming part of Article 21 of the Constitution, stands violated. It is the primary duty of the State to protect and improve the environment under Article 48A and 51A(g) of the Constitution.

19. Respondent No. 13.the Panchayath Development Officer, Gram Panchayath and respondent No. 14.the Secretary, Gram Panchayath in reply to the information sought for, replied stating that no permission to construct the sugar factory is obtained by the Company nor any application is filed seeking such permission under the provisions of Karnataka Panchayat Raj Act, 1993 and Rule 3 of the Karnataka Panchayat Raj (Gram Panchayaths Control Over Erection of Buildings) Rules, 1994. Respondents 13 and 14 being the Chief Executives of the Gram Panchayath ought to have initiated action under Section 64(3)(a) & (b) of the Karnataka Panchayath Raj Act, 1993 and directed the Company to stop the construction and further ordered for the demolition of the said structure, building by giving show cause notice to respondent No. 16. But to the unfortunate fate of the villagers of Yadrav, the said authorities viz., Respondents No. 12 to 14, instead of performing their statutory obligations under the law, are colluding with the respondent No. 17 and performing their duties as per the whims and fancies of the needs of respondent No. 17. This act of the respondents is infringement of the basic Fundamental Rights guaranteed to the villagers of Yadrav in Raibag Taluk as guaranteed under Article 21 of the Constitution. The respondent No. 9-Tahsildar, in response to the application seeking information has stated that no application for conversion of land to non-agricultural tenure has been filed. The lands on which the construction is being taken up by them are still agricultural lands and the same is the blatant violation of provisions of Sections 79B(1)(b)(ii), 79C and 80 of the Karnataka Land Reforms Act, 1961. This fact was also brought to the notice of the District Magistrate/Deputy Commissioner of Belgaum. But the authorities have tried to snub the grievances and resistances shown by the villagers and preferred to be a mute spectator to the illegal activities of Company.

20. The respondent No. 13.the Panchayat Development Officer of Diggevadi Gram Panchayath, Raibag Taluk has granted ‘No Objection Certificate’ to the Company for construction of sugar factory illegally without consulting the members of Gram Panchayath and without following the due process as laid down in Karnataka Panchayat Raj Act and without notice to the villagers and under the pressure of respondent No. 17. It clearly shows that the Panchayat Development Officer was acting under the pressure and coercion from respondent No. 17. The respondent No. 17 Mr. Prabhakar B. Kore, is a Bharatiya Janatha Party (Rajyasabha) Member of Parliament and he is using all his powers being the member of ruling party to get his illegal activities done at the cost of the lives of the residents of the Yadrav Village in Raibag Taluk. After learning this fact, the villagers questioned the elected members of the respondent No. 12, Panchayath, Diggewadi and thereafter, the members of the Panchayat convened an emergency meeting and passed a resolution canceling the illegal ‘No Objection Certificate’ granted by the respondent No. 13, the Panchayat Development Officer. But the respondent No. 13, who was colluding with the respondent No. 17 has not signed on the resolution dated 10.11.2010 as he is in support of the illegal NOC granted by him on 09.11.2010 Copy of the said resolution and the explanation given by the Development Officer for not signing the resolution are enclosed to the writ petition.

21. All the prayers to the concerned authorities to stop the Company from putting up unauthorized structure, have met with silence. The villagers have made representations to respondents No. 7, 8 and 9 who are the District, Sub-Division and Taluka Magistrate to take action under Section 133 of the Code of Criminal Procedure, 1973 for the removal of illegal and unlawful construction and also order for stopping of the illegal activities. The authorities who are helping the respondent No. 17, were working in collusion with him and started ignoring the grievances of villagers of Yadrav. The copy of the letters addressed to various authorities by the petitioners in that behalf are annexed to the writ petition.

22. The promoter of the Company/respondent No. 17 Mr. Prabhakar Kore, is a sitting Member of Parliament (Rajya Sabha) from Karnataka since 2008 and belongs to the ruling Bharatiya Janata Party in the State. He is using his political clout and exerting pressure upon the State authorities to allow him to proceed with the construction of the factory without following any of the provisions of the law. He is maliciously targeting villagers who openly express their resentment and opposition to the illegal activities and voices of people raised against construction of the factory without following the due procedure of law; and the State authorities on the other hand are turning a deaf ear to the various representation made by the villagers to them. Respondent No. 17 is thus acting in a high handed manner and arm twisting the villagers and government officials alike in order to realize his selfish goals.

23. The petitioners have approached the Department of Forest, Environment and Ecology, Government of Karnataka and the Karnataka State Pollution Control Board and requested not to grant permission. Respondent no. 17 without there being any valid licence for the setting up of a Sugar Factory at Yadrav Village of Raibag Taluk is illegally and high handedly proceeding with the construction of the factory. They have produced the Map of Raibag Assembly Constituency showing the locations of Saundatti and Yadrav Villages and also the proposed map issued by the Survey of India showing the two different locations of Saundatti and Yadrav Villages. Saundatti and Yadrav Villages are situated at a distance of 5 kms. The respondent No. 17 has not at all obtained any IEM nor any of the permissions to set up a Sugar Factory at Yadrav Village of Saundatti Taluka in Belgaum District. The respondent No. 17 is proceeding with the construction of the Sugar Factory with full force and in the process of demoting the existing road and other basic amenities of the villagers of Yadrav Village. Photographs are produced to substantiate the said claim.

24. The sons, daughter, and wife of the petitioner No. 13 had filed a suit for partition against him and the respondent No. 17 in O.S No. 146/2010. The said suit is pending. In the written statement filed therein, the respondent No. 17 has categorically stated on oath that he has already started construction over the said property bearing No. R.S No. 98/1A in Yadrav Village and therefore, they have preferred this writ petition seeking for a writ of mandamus to respondents 1 to 16 to take immediate steps against respondent No. 17 who is putting up the unauthorized construction of the Sugar Factory at Yadrav Village, Raibag Taluk, Belgaum District and restrain the Company forthwith from putting up any further construction of the said factory and initiate criminal action against the respondent No. 17 under the provisions of various enactments which are violated by him and for other consequential reliefs.

25. The respondents 1, 2 and 3 have filed a detailed statement of objections setting out the background of the amendment to the Sugarcane (Control) Order and justifying the extension orders passed by them as under:—

Clause 6 of the Sugarcane (Control) Order, 1966 give powers to the Central Government to regulate distribution and movement of Sugarcane. The powers of the Central Government under Clause 6 of the Order have been delegated to the State Government vide notification dated 16.07.1966 By virtue of such delegation of powers, it was expected that the State Government should manage to keep the minimum distance of 15 kms between existing and a new sugar mill as required under the Press Note dated 31.08.1998 However, this could not be done.

26. The Hon'ble Allahabad High Court in the matter of Kisan Sahakari Chini Mills Ltd. v. Union of India . Civil Writ Petition No. 31199/2005 vide judgment dated 01.02.2006 held that the minimum distance criteria of 15 kms as mentioned in Press Note dated 31.08.1988 is directive in nature and not mandatory. The Delhi High Court in the matter of Oudh Sugar Mills Ltd. v. Union of India . Civil Writ Petition No. 12078/2005 in their judgment dated 22.12.2005 ruled that the Press Note dated 31.08.1988 provides for the minimum distance to be observed between an existing sugar mill and a new sugar mill and not between the two proposed sugar mills. In view of the said developments, expert advice of the Department of Legal Affairs was sought for in the matter and they opined as under:—

“Since there is no provisions regarding providing limitation of minimum distance between the two existing or proposed sugar mills in the Sugarcane (Control) Order, 1966, the Sugarcane (Control) Order, may be amended suitably”

27. On receipt of the above advise of the Ministry of Law, the Department initiated the process to amend the Sugarcane (Control) Order, 1966. In the meanwhile, the Hon'ble Supreme Court vide its order dated 05.09.2006 in the case of Balrampur Chini Mills Ltd. v. Ojas Industries Pvt. Ltd. . 2007 9 SCC 43 granted eight weeks time to Union of India to iron out some of the difficulties highlighted by the parties in these cases. After due consultation with the State Governments and other stake holders, the Sugarcane (Control) Order, 1966 was amended vide order dated 10 November 2006 giving statutory backing to the concept of minimum distance. The order was made applicable from the date of its publication in the official i.e with effect from 10 November 2006.

28. Clause 6A puts restriction on setting up of two sugar factories within the radius of 15 kms. It provides that no new Sugar Factory shall be set up within the radius of 15 kms of an existing Sugar Factory or another new Sugar Factory in a State or two or more States. However, the State Government has been authorized to notify the minimum distance higher than 15 kms with the prior approval of the Central Government Then, they have referred to the Explanation appended to Clause 6A, 6B, 6C.

29. They have also set out the judgment of the Apex Court in the case of Ojas Industries (P) Ltd. v. Oudh Sugar Mills Ltd. . 2007 4 SCC 723, which has held that the Sugarcane (Control) Order is retrospective in operation and the consequences of non-implementation of IEM within the period stipulated. It reads as under:—

“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 factories during the stipulated period given to the earlier IEM holders to take effective steps enumerated in Explanation 4 to 6A of Sugarcane (Control) (Amendment) Order, 2006 order operates retrospectively”.

“… If the first IEM holder or the earlier IEM holder take effective steps to implement its IEM then the subsequent IEM holder cannot proceed with his IEM. If the first IEM or earlier IEM 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”

30. Since the Sugarcane (Control) (Amendment) Order, 2006 provides 4 years time to commence commercial production and the Hon'ble Supreme Court has made the said amendment order applicable retrospectively, advice of the learned Additional Solicitor General of India was sought for as to whether this Department should accept this Bank Guarantees from those persons whose IEMs were acknowledged in 1998/1999/2000 i.e prior to June 2003 and have not taken effective steps or have taken some effective steps to implement the IEM. The learned Additional Solicitor General in his letter dated 18 June 2007 has advised the Government that in the light of the categorical judgment of the Hon'ble Supreme Court holding the notification of 2006 is clarificatory and retrospective, the Department should not accept the Bank Guarantees from the first or earlier persons whose IEMs were acknowledged in the years 1998/1999/2000 i.e prior to June 2003 who have not taken effective steps. Bank Guarantees can only be accepted from the first or earlier IEM holders in terms of Clause 6E if the time limit of 4 years, as prescribed in Clause 6C has not expired.

31. M/s. Shivashakti Sugars Limited filed an IEM with Department of Industrial Policy and Promotion which was acknowledged by DIPP vide acknowledgement No. 3080.SIA/IMO/2006 dated 08.06.2006 for setting up of a new Sugar Factory at Saudatti Village, Raibag Taluk, Belgaum District, Karnataka. The IEM was subsequently amended on 19.10.2007 for change of address and capacity. However, the village in which the Shivashakti Sugars was permitted to start the sugar factory remained the same i.e they ought to put up the factory at Raibag Taluk, Belgaum District, Karnataka and what was amended was only the address and the capacity.

32. In response to the notification dated 10.11.2006, M/s. Shivashakti Sugars Limited as per Clause 6E(2), furnished the performance guarantee of Rs. One Crore vide letter dated nil received on 05.06.2007 They have also vide letter dated 14.06.2007 furnished a Distance Certificate dated 05.06.2006 issued from the Cane Commissioner, Government of Karnataka certifying that the proposed new factory of M/s. Shivashakti Sugars is more than 15 kms from other existing sugar mills. The Sugar Factory of M/s. Shivashakti Sugars at Saudatti Village, Raibag Taluk, Belgaum District, Karnataka was taken on record as a “New Sugar Factory” as provided in Explanation 2 to Clause 6A of Sugarcane (Control) (Amendment) Order, 2006 vide order dated 15.04.2008 The IEM was granted to Shivashakti Sugars on 08.06.2006 and that Shivashakti Sugars ought to have taken effective steps on or before 08.06.2008 and further, they ought to have started the commercial production of sugar by 07.06.2010

33. The Government of Karnataka i.e, respondent No. 5, vide letter dated 09.03.2010 addressed to the respondent No. 2 recommended the case of M/s. Shivashakti Sugars Limited for grant of extension of six months for implementing the IEM and commencement of commercial production when the time limit to grant extension of time was already over. The Government of Karnataka in the aforesaid letter informed that M/s. Shivashakti Sugars Limited reported to have taken the following effective steps:

(1) Purchase of 77.03 acres of land and its conversion is under process;

(2) Machinery purchase orders finalization is under process;

(3) They have already spent considerable for the project;

(4) Obtained orders from Irrigation Department to lift 50 lakh liters of water from the river Krishna;

(5) Obtained clearance from Karnataka State Pollution Control Board.

34. As M/s. Shivashakti Sugars Limited did not take effective steps as enumerated in Explanation-4 below Clause 6A of Sugarcane (Control) (Amendment) Order, 2006 within the stipulated time limit of two years from the date of acknowledgement of IEM, a show cause notice dated 27.04.2010 was issued to M/s. Shivashakti Sugars Limited on 27.04.2010 In response to the show cause notice, M/s. Shivashakti Sugars Limited have furnished the details of the effective steps taken by them upto 07.06.2010 vide letter undated (received on 26.05.2010) and 22.07.2010 The copy of the details furnished by M/s. Shivashakti Sugars Limited is as under:—

(i) Land Purchased:

They have purchased 77.17 acres of land and registered the same in the name of M/s. SSL on 04.02.2008

(ii) Placement of Machinery orders:

Boiler, Turbines and Mills are the major machineries required for the sugar plant and they have placed orders for those machineries. For boiling house also they have issued order. So far they have invested Rs. 10 crores.

(iii) Civil Works:

For construction of building for sugar factory they have made an agreement with Shree M/s. Pratibha Construction Ltd. And already basement civil work is over and now they are waiting for machinery drawings so that they can construct the building according to the weight of the machines. In civil work 10% works are over and further works are under progress.

(iv) Sanction of Term Loan from Banks or FIS:

Bank of India and Indian Overseas Bank have sanctioned terms loans to the tune of Rs. 136 Crores vide letters dated 19.05.2008 and 29.01.2008 respectively.

35. The main reason given by M/s. Shivashakti Sugars Limited for not taking effective steps within the prescribed period of 2 years is that there was a family feud and the Chairman of the Company Shri. Prabhakar B. Khore, M.P(Rajya Sabha) was shot at by his nephew three times by revolver on 19.10.2006 and he remained in hospital for more than 1 year i.e from 19.10.2006 to 24.10.2007 and two bullets were removed from his body and third is still in his body. Therefore, he could not attend to work and take further action to implement the IEM and hence, the project was delayed. It was only after his health improved, that he approached the Government of Karnataka to give approval for their factory.

36. In view of the explanation given by M/s. Shivashakti Sugars Limited, the show cause notice dated 27.04.2010 was dropped and in exercise of powers conferred by Clause 6C of Sugarcane (Control) (Amendment) Order, 2006, they have been granted extension of time for six months with effect from 07.06.2008 to implement the IEM dated 08.06.2006 and to commence production thereof by 07.12.2010 vide Orders dated 19.08.2010 They have referred to the Distance Certificate produced by the petitioner as well as the respondent and they have contended that it is the distance certificate issued by the Survey of India-7 respondent which is valid and according to the said certificate, M/s. Shivashakti Sugars Limited is setting up the Sugar Factory is beyond 15 kms from the existing factory and therefore, they contend that there is no merit in the writ petition and seek for rejection of the same.

37. The 4 respondent-Sugar Cane Commissioner has filed his statement of objections. He states that the State Government has been vested with the power under the Sugarcane (Control) Order, 1966, for allocation of sugarcane area for different factories. On an application made by respondent No. 6, the State Government, by an order dated 07.11.2007 was pleased to grant ‘in-principle clearance’ for establishment of the Sugar Factory. Raibag Sahakari Sakkare Karkhane is a society registered under the provisions of the Karnataka Co-operative Societies Act, 1959. It was closed for several years. An order of liquidation was passed by the State Government on the recommendation by the Commissioner. From the year 2001-02 itself, the crushing activity of the petitioner came to be stopped. In order to rejuvenate the Sugar Factory, the factory had floated tenders, in which the petitioner was declared as the successful tender. However, even before this, when the factory was not functioning, permission to respondent No. 6 has been granted. In the year 1995 itself, Raibag Sahakari Sakkare Karkhane has conveyed a “No Objection Certificate” for establishment of respondent No. 6 factory. Apart from this, on a recommendation made by the Deputy Commissioner regarding the viability and availability of the cane in the area concerned, respondent-Authority has passed an order known as “The Karnataka Sugarcane (Regulation of Distribution) M/s. Shivashakti Sugars, Saudatti Village, Raibag Taluk, Order 2007”. The said order admittedly is not called into question by the petitioner nor by Raibag Sahakari Sakkare Karkhane. They have accepted the said order. The allocation of cane area made in favour of M/s. Shivashakti Sugars is an informed decision. It is a decision made on the basis of relevant materials. It is a decision made eminently in public interest, that is to say, in the interest of sugarcane farmers growing sugarcane in and around Raibag Taluk.

38. The Deputy Commissioner, Belgaum, by communication dated 25.08.2006 made a recommendation for allocation of 16 villages situated in Raibag Taluk and 7 villages situated in Chikodi Taluk to be allocated in favour of M/s. Shivashakti Sugars. In this regard, it was recommended that Doodhganga Sahakari Sakkare Karkhane, by communication dated 12.08.2006, had informed that they had no objection for about 7 villages to be allocated in favour of M/s. Shivashakti Sugars and, therefore, M/s. Shivashakti Sugars was requested to be allocated with 16 villages from Raibag Taluk and 7 villages in Saundatti Taluk.

39. On receipt of the said communication, a meeting was convened under the Chairmanship of the Secretary, Commerce & Industries Department, on 12.05.2006 It was noticed that the Taluk Agricultural Officer had reported that the total potential of sugarcane growth is 23.22 lakh tones per year and that the necessity of M/s. Shivashakti Sugars was merely 5 lakh tone per year. It was also noticed that in view of the closure of Raibag Sahakari Sakkare Karkhane, sugarcane growers of the said area were forced to supply sugarcane to Doodhganga Sahakari Sakkare Karkhane and Halasiddanatha Sahakara Sakkare Karkhane. Those two factories also were unable to receive the sugarcane so grown, resulting in the sugarcane farmers being forced to carry their sugarcane to the neighbouring State of Maharashtra, which has counter productive of the interest of the farmers in general.

40. Notice was issued to M/s. Doodhganga Sahakari Sakkare Karkhane and M/s. Raibag Sahakari Sakkare Karkhane. In the said meeting held on 04.06.2007, the Managing Director of Raibag Sahakari Sakkare Karkhane concurred with the recommendation made by the Deputy Commissioner. Doodhganga Sahakari Sakkare Karkhane had also issued no objection. In taking into account these factors, the State Government passed an order dated 07.11.2007 It also requires to the mentioned before this Hon'ble Court that for the year 2008-09, Raibag Sahakari Sakkare Karkhane has only crushed 20,573 tones of sugarcane, whereas its crushing capacity is 4 lakh tones. Out of 23 lakh tones of sugarcane so grown in that area, if the entire 4 lakh tones is given away to Raibag Sahakari Sakkare Karkhane, yet there would be excess cane available in the area. In these circumstances, the commencement of M/s. Shivashakti Sugars would be actually in the interest of sugarcane farmers, which would encourage sugarcane growth and also prevent the farmers from transporting their sugarcane outside the State. There has been under-crushing of sugarcane grown in the entire State as such. In fact, for the year 2007-08, it was noticed that as against the growth of 340 lakh tones of sugarcane, only 270 lakh tones was crushed, thereby leaving about 70 lakh tones of sugarcane remaining uncrushed. For the year 2008-09, it was projected that 90 lakh tones would go without crushing. Therefore, the State Government announced several incentives to sugarcane farmers for paying compensation for uncrushed sugarcane and also incentives to Sugar Factory were given to crush sugarcane apart from the allocated area, with an incentive of Rs. 100/- for every tone of sugarcane so crushed. All these would go to show that commencement of new Sugar Factories would be in the interest of all concerned and in the public interest. The Karnataka Geo Spatial Data Centre has also issued a Certificate intimating that the distance between the petitioner and the respondent No. 6 factory is more than 15 kms. The present respondent has also issued a Certificate to the effect indicating that all the factories are not within the radius of 15 kms. It cannot be disputed that having an establishment like respondent No. 6 would help the farmers of the said area. The grant of certificate is based on the material on record and the data collected by this respondent. It cannot be said to be a certificate without any basis. The office of this respondent has also been informed about the progress made by respondent No. 6 in establishment of the factory. Looking at the progress made, the respondent has also made a recommendation to the Central Government for extension of the IEM granted, which has also been granted. The petitioner has no independent right. Raibag Sahakari Sakkare Karkhane has accepted the order of sugarcane allocation. The order of the Government allocating the sugarcane area is not called into question before this Hon'ble court. In these circumstances, the question of allocating the sugarcane area in favour of the petitioner does not arise.

41. M/s. Shivashakti Sugars Limited have filed a detailed statement of objections.

From paragraph 2 to 9, the 6 respondent has clearly set out what was the legal position prior to amendment to the Sugarcane (Control) Order, 2006 and what are the legal requirement to be complied with by a Sugar Factory for being set up. Therefore, it is clear that the 6 respondent is fully aware of the legal requirements to be complied with by a Sugar Factory to set up a Sugar Factory. It is stated that the respondent No. 6 filed an application with the Government of India seeking grant of license, for establishment of a sugar mill with a capacity of 2500 TCD at village Saundatti, Tehsil, Raibag Taluk, District Belgaum. The Government of India on 03.07.1996 granted a letter of intent/permission for issuance of Industrial License under the Industrial (Development and Regulation) Act, 1951 for location of the sugar unit at Saundatti Village, Tehsil Raibag, District Belgaum. The petitioner industry had issued a no objection to set up a Sugar Factory, when the 6 respondent had made the application to the Central Government under the IDR Act. Even before the letter of intent was to be implemented, the 1998 notification intervened and the Government of India itself permitted persons like the 6 respondent to file only Part-B of the IEM and if there was any variance, to file part A of IEM if there was any IEM. In accordance with the press note dated 31.08.1998, 6 respondent filed an application before the Government of India and accordingly on 08.06.2006, it was granted an IEM. The respondent No. 6 Company was acknowledged with an IEM in respect of which LOI was granted. In accordance with Sugarcane (Control) Order, 1966, 6 respondent in terms of amended provisions gave a Performance Guarantee of Rs. One Crore executed by M/s. Canara Bank, Belgaum Main Branch, in favour of Chief Director of Sugar, Government of India for due establishment of the factory.

42. On 19.10.2007, a small correction was to be made as regards the Registered Office, which was also effected by the Department. On 04.08.2007, based on the application filed by respondent No. 6, the Government of Karnataka, in exercise of its power conferred under the Sugarcane (Control) Order, 1966, passed an order known as ‘Karnataka Sugarcane (Regulation & Distribution) M/s. Shivashakti Sugars, Saudatti Village, Raibag Taluk, 2007. By such an order, 28 villages situated in Raibag Taluk were exclusively allocated in favour of respondent No. 6 factory for supply of sugarcane. The effect of such an order is that sugarcane grown in the said area has to be exclusively allocated to the said factory. On 07.11.2007, the Government of Karnataka, based on an application and the clearance given by the State High Level Clearance Committee, passed an order approving the Sugar Plant to establish 3000 TCD Sugar Plant with 14 MW Co-generation Plant and 30 KLDP Distillery Plant. Various infrastructural facilitates were also granted by the Government. On 25.10.2006, the Government of Karnataka, by an order, in exercise of its powers under Section 109 (1) of the Karnataka Land Reforms Act, was pleased to permit respondent No. 6 to purchase various agricultural lands in the area where the Sugar Factory was to be established. On 23.10.2007, the Government of Karnataka has been pleased to permit usage of 0.0625 TMC water from Hippargi Village. The Department of Central Excise and Customs Tax had also granted a Registration Certificate in Form No. RC for the respondent No. 6. On June 5, 2006, a certificate was issued by the Commissioner for Cane Development and Director of Sugar stating that there was no Sugar Factory within the radius of 15 kms from the proposed plant. On 20 July 2007, the Commissioner for Cane Development and Director of Sugar has granted a Certificate intimating that M/s. Raibag Sahakari Sakkare Karkhane had stopped its operation from the year 2001-02 till date. On August 17, 2007, the Commissioner for Cane Development & Director of Sugar has granted a Distance Certificate to respondent No. 6 intimating that the Chief Director of Sugar certified that the distance between the Sugar Factory to be set up by respondent No. 6 and other sugar factories is beyond 15 kms. The 6 respondent has already taken the following steps for implementation of the IEM:

i) It has totally purchased 73 acres 29 guntas of land. A tabular column depicting the sale effected is produced and marked as Annexure-R7.

ii) As regards purchase of plant and machinery, it was stated that on 05.11.2007, the Company had placed order with M/s. Kay Bouvet Engineering Pvt. Ltd. for supply of complete boiling house for a total consideration of 21,25,00,000 and they have enclosed Annexure-R8, the order placed.

iii) In so far as civil works are concerned, it was stated that advance final amount of Rs. 10 lakhs vide Cheque No. 359715 dated 30.06.2008, IDBI, Tirupur paid to Sree Sabari Constructions and gave the particulars of the work done which shows that they had undertaken work of land leveling. Copy of the agreement with M/s. Sree Sabari Constructions is also produced as Annexure-R9.

iv) They have also stated that they obtained requisite term loans from me banks and financial institutions. The amount sanctioned was Rs. 136 crores. Copy of the credit facilities sanctioned by the Bank of India, Coimbatore Corporate Banking Branch and Indian Overseas Bank, R.S Puram, Branch and copies of the same are also produced as per Annexure-R11 and 12. Copy of the Certificate issued by the Chartered Accountant of respondent No. 6 M/s. P.G Ghalli & Co. indicating the expenditure already incurred towards the 3500 TCD plant is produced as Annexure-13.

43. Respondent No. 6 filed an application before the Chief Director of Sugar seeking extension of time limit and accordingly, on 13 August 2010, the Chief Director of Sugar has granted time for implementing the IEM upto 07.12.2010 In the absence of any challenge to it, the question of seeking judicial review and declaration in terms of Prayer does not arise. Malafides are alleged against the petitioner. Then, they have stated the legal position and also pointed the delay and laches on the part of the petitioner in approaching the Court and therefore, they have sought for dismissal of the writ petition.

44. Managing Director of the 6 respondent Sri. Prabhakar Khore has been made as a party in person in the Public Interest Litigation filed as allegations are made against him. Therefore, he has filed a statement of objections traversing the allegations made against him. He contends that he is the Director of the 6 respondent — company. The petitioners have alleged that he being a Member of Rajya Sabha from Bharatiya Janatha Party has used all powers to get his illegal activities done at the cost of the lives of the residents of Yadrav Village in Raibag Taluk. He being a promoter of the factory, is using the political clout and exerting pressure upon the State Authorities to allow him to proceed with the construction of the factory. He adopted the statement of objections filed by the Company. He has stated that this writ petition is a classic case of abuse of process of Court of Law. The petition does not disclose any public interest. On the contrary, the petitioners who have been set up M/s. Renuka Sugar Factory who have, on being unsuccessful in their individual capacity to obtain an interim order, they have set up the petitioners in these petitions. He has referred to writ petition filed by the petitioners in W.P Nos. 68189-191/2010 and 68213-216/2010 in the Circuit Bench at Dharwad, seeking the very same reliefs. On their request under a memo for withdrawal reserving liberty to them to file appropriate petition before the appropriate forum; the said writ petition was dismissed as withdrawn. Though the petitioners are 15, all of them belong to two families. In fact, in the Circuit Bench of Dharwad, same writ petition was filed by 7 persons, one Sri. Sadashiv S/o Maruti Ninganure and others. After hearing notice was ordered. Thereafter, they have withdrawn the petition. The reason for withdrawal is not mentioned. The petitioner No. 1 Sri Kallappa S/o Ramachandra Khot in the present writ petition, is none other than, son of one Sri. Ramachandra S/o Siddappa Koth, who was petitioner in writ petition No. 68189-191/2010. The said writ petitions were withdrawn and present writ petition has been filed. The petitioner Sri. Sadashiv S/o Marui Ninganure and others having abused the processes of this Hon'ble Court are guilty of gross criminal contempt of court and they are liable to be prosecuted for the same. They have tried to mislead the court and therefore, the petition itself requires to be dismissed with exemplary cost. Then, they have referred to the connected writ petitions filed which according to him is an unending harassment. In all the writ petitions allegations are the same and there is a collusion and these petitioners are mere name lenders and have been ‘set up’ by M/s. Renuka Sugars to stall the commencement of the factory, by one or the other way. M/s. Renuka Sugar by themselves have monopolistic tendency; not only stalling the present factory but initiating series of proceedings in respect of others also. They have filed 22 IEMs for different locations in Karnataka State alone and another 18 IEMs for 10 more locations in other parts of the country. They have obtained these IEMs to block locations from being available to other entrepreneurs, who can implement the sugar mill projects promptly. They have set out number of IEMs and how the Renuka Sugars are operating. At any rate, he has, at no point of time, used his office or his status as a Member of Parliament belonging to Bharatiya Janatha Party for the purpose of getting clearance by the State Authorities and therefore, the said allegations are false and have been calculatedly made in order to prejudice the case in favour of the petitioners. The fact that the allegations are false can be demonstrated by the fact that, respondent No. 18 became Rajya Sabha Member, sponsored by Bharatiya Janatha Party only in the year 2009, whereas, the factory was conceived way back in the year 1996 and all permissions including statutory clearances were obtained much earlier to 2008. The petitioners without ascertaining any facts, or without any basis, have made an allegation that respondent No. 18 has used his position in order to get the clearances in their favour. The petitioners have not substantiated as to which of the orders are passed by which of the authorities, under the influence of respondent No. 18 for getting clearances. In the absence of the same, the petition requires to be rejected with exemplary costs. It is further stated that he is totally hurt by the allegations made by petitioners for the reason that in his long years of public life, he has endeavored high values and practiced the same. Since such wild allegations have been made, he deems it necessary to place on record that he has done yeoman service to the cause of education and co-operative sector in the northern part of Karnataka. He has been single handedly instrumental in establishing and managing number of educational institutions providing education from Kinder Garden to Post Graduation and extending health care to the entire region. He was nominated as a Member of the Legislative Council for the services rendered by him in co-operative sector. He was earlier a Member of Rajya Sabha in the year 1990. In all years of his public life, he has maintained high standards and has never given cause for complaints in his discharge of duties. It is false and misleading for the petitioners to contend that this respondent has exerted any political influence to violate the rule of law and has sought for dismissal of the writ petition with exemplary costs.

45. The 7 respondent, Survey of India have also filed the Statement of Objections. They state that the respondent is the National Survey and Mapping Organization of the Country and functions under the umbrella of the Department of Science and Technology, Government of India and is also the oldest Scientific Department of the Government of India. It is further stated that they provide base maps for expeditious and integrated development and ensure that all resources contribute with their full measure to the progress, prosperity and security of our country. They issued a Distance Certificate to M/s. Shivashakti Sugars Limited as per the then existing laid down procedure which was prevailing till 31.12.2007 in Survey of India, according to which, the Indenter used to mark the position of Sugar Mills in topo sheets, and further that based on the said topo sheets, this respondent was to compute the horizontal distance from the marked position in the topo map and issued the certificate accordingly. Since the respondent issued the distance certificate, based on the data provided by the indenter, the accuracy of marking of location on the topo map lies with the Indenter, and this respondent as such does not have any responsibility or liability regarding such a certificate issued by it. Topo maps are produced after a ground survey in a scientific method applying the knowledge of distance and direction in the field. Since 1:50,000 scale maps are used for determination of horizontal distance, a shift of one dot in the map for the location of sugar mills marked on it will have a shift of 12.5 meters only in the ground. That is to say that there will not be significant variation in the distance with a little shift in the location of sugar mills marked in the topo maps. Hence, the claim and the averments of the petitioners are not sustainable. The Surveyor General of India is the authority for the publication of topo maps. These topo maps depict all the topographical features existing on the ground at the time of survey as permitted by the sale. The directions under which the distances were given prior to 01.01.2008 to the Indenter is enclosed as Annexure-R1 and the procedure followed is set out as under:—

(a) The indenter should mark the position of the Sugar Factories (existing and proposed), whose distances are required on original/xerox copy of the topographical map and submit it with application and required amount of fee in the form of Demand Draft.

(b) The indenter has to mention the name and location of the Sugar Factories from where the distances are required.

(c) After receiving the application from the indenter, Survey of India will find out the distances from the existing topographical maps. The distances are calculated from the marked positions, which generally meet the required accuracy. The policy was amended with effect from 01.01.2008 and new policy was also set out.

46. Thereafter, they also stated that the respondent having been issued the certificate strictly in compliance with the existing guidelines and norms, this respondent cannot be faulted. Therefore, they also sought for dismissal of the writ petition.

47. The 7 respondent has filed his objections to the application, under Order VI Rule 17 opposing the said petition. They contend that the petitioners have not challenged the order dated 18.08.2010 What is challenged is only further extension of time granted on 01.12.2010 If the amendment is allowed, great prejudice would be caused to the respondent No. 7. It is also stated that the power vested with the Chief Director of Sugars has been exercised bonafidly. The Chief Director of Sugars considering the investment made by the respondent No. 7 and considering that there is compliance with all requirements of law and being fully satisfied about need of grant of extension of time has done so. Both the Yadrav Village and Saudatti Village are abutting to each other and on perusal of approved plan shows that the factory is spread over in both villages. The entrance to cane yard and Sugar Factory is only in Saudatti Village and other portion of the factory comes in Yadrav Village. The permission of both village Panchayats are obtained. The factory does fall within Saundatti Village and also spread over Yadrav Village and therefore, the application is liable to be dismissed.

48. The Karnataka State Pollution Control Board, which is the respondent in PIL petition, have filed their counter contending that the petitioners have not come to this Court with clean hands. The respondent No. 15 has granted the Consent for Establishment (for short CFE) to the respondent No. 17 by its order dated 18.12.2008 for setting up of a sugar industry with crushing capacity of 3500 TCD and co-generation plant of 4.5 Mega Watt in survey number shown in the said order. While granting consent for establishment for setting up of a sugar industry to the 17 respondent, they have imposed conditions to control both water and air pollution. In so far as the trade effluents generated in the said sugar industry are concerned, they have imposed the conditions to provide effluent treatment plant comprising in the units as mentioned in the Statement of Objections. It is only after providing the said effluent treatment plant comprising the units and after satisfying the efficiency of ETP, these respondents considered the issuing of consent for operation and in which event only, the respondent No. 17 would be authorized to operate the industrial plant i.e after getting CFO-Consent for Operation.

49. In so far as air pollution, disposal of solid waste is concerned, they have imposed conditions as per law and only after those conditions are complied with, the respondent No. 17 will be permitted to operate its Sugar Factory. Therefore, while issuing the consent for establishment, the respondents 15 and 16 have taken sufficient care to see that the 17 respondent would operate its sugar industry in accordance with the provisions of both Water and Air Acts. These facts have not been placed by the petitioners before the Hon'ble Court. If at all the petitioners are aggrieved against issuing of CFE by these respondents, it is always open to the petitioners to question the same before the appellate authority constituted under both Water and Air Acts. Along with the said statement of objections, they have filed Annexure-R1 dated 18.12.2008 granting consent for establishment of the sugar industry.

50. Sri. S.S Naganand, learned Senior counsel appearing for Doodganga Sugar Factory submitted that the establishment of the sugar factory by the Shivashakti Sugars at Saundatti Village is within 15 kms from Doodganga Sugar Factory. According to the certificate issued by the PWD, the distance is 13.8kms Infact, the sugar factory is not established in Saundatti Village at all. It is set up at Yadrav Village which is in between Saundatti Village and Nanadhi Village of Chikkodi Taluk, which is still less than 13.8 kms. Therefore, under the Sugarcane Control Order, no new sugar factory could be established within 15 kms. As such, the IEM filed by Shivashakti Sugars is invalid, contrary to law and they are not entitled to set up any industry. Further, he also pointed out that the distance certificate which they have produced is not on the basis of the actual measurement made by the Survey Department, but on the information given by Shivashakti Sugars and as is clear from the certificate issued by the Survey Department, they are not prepared to work out as regards the correctness of the measurement. Therefore, he submits that there is flagrant violation of the statutory provision, which is mandatory in nature and Shivashakti Sugars have no right to set up an industry within the prohibited area. He also submitted that according to the material produced by Shivashakti Sugars, hardly 66.7 acres is situated in Yadrav Village and the IEM is obtained to set up an industry in Saundatti Village and therefore, the sugar factory setup in Yadrav Village is illegal and cannot be permitted. Shivashakti Sugars have not taken effective steps as contemplated under Explanation IV of Section 6A of the Sugar Control Order within a period of two years and the documents produced in support of the contention that they have taken effective steps do not substantiate their claim, on the contrary, they clearly disclose that no such effective steps were taken. In fact, the certificate issued by the Chartered Accountant clearly proves this point. Therefore, he contends that when there is a violation of the statutory provisions, Shivashakti Sugars should not be permitted to set up the industry.

51. Sri. Ravi Varma Kumar, learned Senior counsel appearing for the shareholders of Raibagh Sugar Factory, adopting the aforesaid argument, contended that Raibagh Sugar Factory is situated in Bavachi Village at Raibag Taluk. Yadrav Village is nearer to Bavachi Village when compared to Saundatti Village. The material on record discloses that no factory is established at Saundatti Village and therefore, within 15 kms from the place of Raibagh Sugar Factory, Shivashakti Sugars would not have established their factory. He also submitted that the distance certificate issued by the authorities are not in accordance with law and even if it is taken to be correct, as no sugar factory is established in Saundatti Village and is sought to be established in Yadrav Village which is nearer to Bavachi Village, it falls within 15 kms., as such, there is a contravention of the mandatory provision of law.

52. Sri K. GRaghavan, learned Senior counsel appearing for the lessee of Raibagh Sugar Factory viz. Renuka Sugars contended that the IEM was filed on 8.6.2006 prior to the amended Rules came into effect from 10.11.2006 as by that time, no effective steps had been taken as is clear from Section 6(c)(1). Shivashakti Sugars were under an obligation to file a fresh IEM and comply with the requirements of amended provisions, which they have not done. Therefore, IEM filed prior to the Rules coming into force spelt itself and it is not yest. Even a liberal interpretation is to be placed on these provisions as per Clause 6E of the Sugar Cane Control Order. The first step in the establishment of a sugar factory is obtaining a distance certificate from a competent authority. Thereafter, within thirty days' therefrom, enclosing the distance certificate, IEM is to be filed. From the date of acknowledgement of the said IEM within two years, as a second step, the effective steps as contemplated in Explanation IV to Section 6A is to be complied with. As on the day the amended Rules came into force, no effective steps had been taken. The persons who had filed IEM were required to offer/furnish a performance Bank Guarantee of Rs. 1,00,00,000/-. The commercial production should commence within four years from the date of IEM. If, for any reason, within the aforesaid stipulated period it is not possible to implement the IEM, law proceeds for one year's extension, in installment of six months' each. In the instant case, the material on record discloses that no effective steps were taken within two years from the date of the IEM filed. No request for extension of time was made and on the day the Central Government granted extension, two years' period had expired. But, by that time, by operation of law, the IEM stood de-recognised. Therefore, the order passed by the Central Government extending the time has no legal effect, it is void ab initio and nonest in the eye of law. He also pointed out that none of the four steps which are contemplated in Explanation IV, is fulfilled and unless all the effective steps were effected within the stipulated period, Shivashakti Sugars could not have established the sugar factory under the Sugar Cane Control Order. Therefore, he submits that firstly IEM was not in existence. Even if it is to be held in existence, it stood de-recognised as no effective steps were taken within two years from the date of IEM. These provisions being mandatory of actions, after the IEM stood de-recognised, is without any legal effect and has to be ignored.

53. Sri. Nanjunda Reddy, learned counsel appearing for the petitioners in the public interest litigation, adopting the aforesaid submission made, contended that apart from the infirmities pointed out by the learned counsel appearing in other cases, this sugar factory has been set up in total disregard to the Rule of law. Shivashakti Sugars have not obtained a license under Section 64 of the Grama Panchayat Act for establishment of the sugar factory either in Saundatti Village or in Yadrav Village. Similarly, they have not obtained any sanctioned plan as contemplated under Section 65 of the Grama Panchayat Act to put up any construction either in Saundatti Village or in Yadrav Village. They have also not obtained permission under the Factories Act which is mandatory. They have not obtained orders of conversion for using agricultural land for industrial or non-agricultural purposes. They have also not obtained permission in respect of the entire extent of land for purchasing agricultural land as admittedly, under provisions of the Karnataka Land Reforms Act, they could not purchase agricultural land. Similarly, requisite permissions have not been obtained under the Air Act and the Water Act. The permission granted by the Pollution Control Board ex-facie is illegal. It purports to give no objection for establishing of an industry in the survey numbers mentioned therein in Saundatti Village. Those survey numbers do not belong to Shivashakti Sugars. Shivashakti Sugars have not acquired those lands and therefore, there is total non-application of mind by the authorities in granting the said no objection certificate. Infringement of law which is actively or passively condoned for personal gain, if encouraged, will inturn lead to a lawless society. That is precisely what is happening in so far as establishment of Shivashakti Sugars is concerned. Therefore, the public interest is in maintaining of Rule of law, upholding the Rule of law and therefore, they have locus standi to maintain these writ petitions.

54. Per contra, Sri. B.V Acharya, learned Senior Counsel appearing for Shivashakti Sugars in the public interest litigation submitted that all the actions taken by the sugar factory is strictly in accordance with law. Infact, a letter of indent was applied for on 3.7.2006 On 8.6.2006 IEM was filed and duly acknowledged to set up a sugar factory in Saundatti Village. Sugar Control Order was amended introducing Section 6A to 6E on 10.11.2006 On the day, the DEM was filed, there was no sugar factory in existence within a radius of 15 kms from Saundatti Village and therefore, there was no necessity for a distance certificate and it cannot be said that the IEM filed is illegal. He pointed out how efforts were made by the petitioners in the other cases to scuttle the establishment of a sugar factory and when they failed to get any interim orders, they have set up these papers for filing a public interest litigation in Bangalore, the Principal Bench. He also pointed out that certain civil litigations and other writ petitions were pending and withdrawn and submitted that this writ petition is not filed in public interest which is actuated with malafides. It is instigated by Raibagh Sugars, the rival in the business and therefore, he submits that on the short ground, the writ petition is liable to be dismissed.

55. Learned Advocate General, defending the action of the State in allocating 14 Villages which had earlier been allotted to Raibagh Sugar Factory and another 7 Villages which were allotted to Doodaganga Sugar Factory, stated that those two sugar factories gave no objection for the said allotment. In Raibagh Sugar Factory, crushing of sugarcane is stopped in 2001-02. Infact, in Raibag Taluk, there was excess sugarcane available which was not utilised. Infact, the farmers were compelled to take their sugarcanes to the State of Maharashtra which is not in the interest of the State or commerce. The sugar factory which is now sought to be established is beyond 15 kms from these two factories. Under these circumstances, the Cabinet took principle decision to allocate 21 villages to the new factory to be set up. The bar contained in Section 6A of the Sugacane Control Order is not attracted to the facts of this case. In so far the Government is concerned, public interest is of paramount consideration. Assuming that the existing sugar factories need sugarcane and by allotting the villages which is allotted to the earlier, attracted to the better interest. They could approach the Government after hearing all the parties. The Government do not mind re-allocating these villages. Therefore, whatever action taken by the Government is in public interest in order to protect the interest of sugarcane growers and is also strictly in accordance with law and it cannot be found fault with.

56. Sri. Vijaya Shankar, learned Senior counsel appearing for the sugar factory contended that the writ petition filed by Raibagh Sugars which is a business rival, is not maintainable as held by the Apex Court in the case of ‘The Nagar Rice Flour Mill v. N. Teekappa Gowda . AIR 1971 SC 246’ The whole object is to drive out all competitors and virtually have monopoly in sugar industry which should not be permitted. Shivashakti Sugars owns land in Saundatti Village as well as in Yadrav Village which are adjoining each other. The lands owned by the factory in these two villages is a compact single block. A sugar house is situated in Saundatti Village and crushing of sugar is done in Yadrav Village. It is transported by pipes to the sugar house. Therefore, the establishment of the sugar factory at Yadrav Village do not contravene any law. He further submitted that the IEM filed and recognised on 8.6.2006 for the purpose of computing the distance between the existing factory and the new factory to be set up, that date is not crucial. The date to be taken is the date on which the sugar factory is set up or at any rate, the date on which the Government allocated villages to the said sugar factory. If those dates are taken into consideration, five years prior to the date, there was no crushing of sugarcane in Raibagh Sugar Factory and therefore, there is no necessity of a distance certificate as no sugar factory exists within 15 kms radius from the proposed factory. Even otherwise, the distance between these two existing sugar factories and the proposed sugar factory is beyond 15 kms as is clear from the certificate issued by the Cane Commissioner which is inturn based on the measurements furnished by the Survey Department who are the only authorities who are competent to give the distance certificate. Therefore, the distance certificate issued by other authorities on which reliance is placed, has no legal effect. He also pointed out from the material on record, how effective steps have been taken within two years from the date of filing of IEM. It is thereafter, as the IEM could not be completed within a period of four years permitted under law, request was made for extension. Infact, the Government of Karnataka recommended for extension. Taking into consideration the reply given to the show cause notice and the recommendation of the Government, the Central authority has extended the time for implementation of the IEM, not once, but twice which is strictly in accordance with law and by that official act, a presumption flows that Shivashakti Sugars had taken effective steps within a period of two years. The certificate produced by the Chartered Accountant clearly gives the amount of expenditure incurred in the establishment of the factory under various heads and therefore, he contended that these writ petitions filed with oblique motive are liable to be rejected.

57. Sri. Madhusudhan R. Nayak, learned Senior counsel appearing for the promoter of Shivashakti Sugars contended that the material on record discloses that there is excess sugarcane grown in the area. The Government policy and the whole object behind de-licensing and establishment of sugar factories is to cater to the need of the fanners who are growing sugarcane and thus, to avoid hardship which would otherwise cause to them. The Apex Court in more than one cases, has held that the Courts have to keep in mind the financial condition of the farmers, availability of sugarcane in the area and the facility of crushing sugarcane. If those circumstances are taken into consideration, there is no substance in any of the contentions of the petitioners. These petitions are endeavoured by Raibagh Sugars who are the rival in the business. Though the IEM was filed in the year 2006, for nearly four years, none of them moved their little finger. It is only in 2010 when the factory was nearing completion, several petitions were filed in order to throat the establishment of the factory. Therefore, these petitions lack bonafides and are liable to be dismissed. He also pointed out that once a person becomes a member of a co-operative society, he puts his individuality for the society and he has no independent right except those given to him by the statute and the bye laws and therefore, these writ petitions by the shareholders of a co-operative society is not maintainable as the society itself have not chosen to challenge the action of the respondents and therefore, he contended that there is no merit in any of these writ petitions and they are liable to be dismissed.

58. The case was heard continuously for about ten days and the parties were given equal opportunity to produce documents in the course of hearing apart from what they had produced along with the pleadings and therefore, at the fag end of hearing, Shivashakti Sugars filed a compilation of all these documents including those documents which were not produced earlier, for perusal of the Court. Therefore, we have on record, documents which have no reference in the pleadings, but which were produced to meet the case of the parties at the time of hearing. We may also record herein that all the documents were also not produced and therefore, if documents are not produced inspite of sufficient opportunity being granted which is relevant in deciding the issues involved in the case, the Court has to draw such inferences as available in law because one batch of writ petitions are filed agitating the private interest, a public interest litigation is also filed. It is because of that, complete freedom was given to the parties to produce documents, submit arguments so that ultimately the Court will be able to find out where lies the truth and it is well settled in public interest litigation, these Rules of procedure cannot be strictly in applied. It is in this background, now we have to appreciate the material on record and find out the correctness or otherwise of the various contentions urged by all the parties to the proceedings. Therefore, the points that arise for our consideration in all these proceedings are as under:

(1) Whether Shivashakti Sugars has set up a sugar factory at Saundatti Village in accordance with law in as much as

(a) is there a valid industrial entrepreneur memorandum filed in accordance with the Sugarcane Control Order;

(b) is the new sugar factory established beyond 15 kms from the existing sugar mills viz. Doodaganga Sugar Mills and Raibagh Sugar Mills;

(c) the distance certificate obtained is in accordance with law;

(d) after filing of the IEM whether effective steps have been taken in terms of Explanation IV to Clause 6A of the Sugarcane Control Order such as:

(i) whether the land required for setting up the industry is acquired;

(ii) whether civil construction and building was commenced within the stipulated period of two years;

(iii) whether firm order for plant and machinery and the letter of credit was within two years period;

(iv) whether requisite finance has been arranged

(2) If effective steps are not taken within the stipulated period of two years, whether IEM stands de-recognised?

(3) Whether the order of extension passed by the Central Government is valid in accordance with law or is void ab initio and nonest?

(4) Whether these writ petitions filed are not maintainable and liable to be dismissed on the ground of delay, laches, want of bonafides and on the ground that no public interest is involved?

(5) What order?

59. In order to answer these questions it is necessary to have a bird's view of the Government policy on sugar, the object with which Sugarcane (Control) Order was passed and the circumstances which led to its amendment and the scope of the amended provisions of the Sugarcane Order.

60. In exercise of the powers conferred by Section 3 of the Essential Commodities Act, 1955 (Act No. 10 of 1955), the Central Government has made the Sugarcane Control Order, 1966 providing for fixing the minimum price of sugarcane to be paid by producers of sugar, additional price for sugarcane purchase for regulating distribution of movement of sugarcane, for issue of license to power crushers candasal units and for other materials connected therein. The Parliament enacted Industries (Development and Regulation) Act, 1951 for the development and regulation of certain industries. Sugar factory is one such industry which fell within the aforesaid Act. The Central Government was issuing guidelines for licensing of sugar factories by virtue of the power conferred by the aforesaid Act from time to time. By virtue of press note No. 16, the Government of India formulated a revised guideline for licensing new and expansion of existing sugar factories. It provided for the minimum economic capacity of 2500 tonnes cane crush per day. One of the important guideline was that licenses for new sugar factories will be issued subject to the condition that the distance between the proposed new sugar factory and an existing/already licensed sugar factory should be 25 kms. The distance criterion of 25 kms could however be relaxed to 15 kms in special cases where cane availability so justifies. Other things being equal, preferences in licensing will be given to proposers from the co-operative sector and the public sector in that order as compared to the private sector. In case more than one application is received from any zone of operation, priority will be given to the application received earlier. However, in such cases also, preference will be given to the co-operative sector followed by the public sector and the private sector in that order, even though the applications of the first two sectors may be of a late date.

61. Applications for licences will be initially screened by the Screening Committee of the Ministry of Food. While considering such applications, the comments of the State Government/Union Territory Administration concerned would also be obtained. The State Government/Union Territory Administration would be required to furnish their comments within 3 months of the receipt of communication from the Ministry of Food.

62. All applications for grant of Industrial Licences for the establishment of new sugar factories as well as the expansion of existing units should be submitted directly to the Secretariat for Industrial approvals in the Department of Industrial Development in Form IL alongwith the prescribed fee of Rs. 2,500/-. The said guidelines came into force from 8.11.1991 On 10.1.1996, revised guidelines were issued by way of Press Note No. 1. One such guideline which came to be modified is the licences of new sugar factories will be issued subject to the condition that the distance between the proposed new factory and an existing/already licensed sugar factory should be not less than 15 kilometers. The basic criterion for grant of licence of new sugar factory would be cane availability or the potential for the development of sugarcane or both. The said guideline was again amended on 28.5.1987 by way of Press Note No. 6 to the effect, the guidelines for consideration of applications for industrial licenses for sugar factories were revised vide Press Note No. 1 of 1997 dated 10.1.1997 Interalia, the guidelines provide for maintaining a minimum distance criteria of 15 km among sugar factories. It was seen that many of the letters of intent issued for sugar factories do not fructify and remain approvals on paper for the entire initial validity period of three years. The location mentioned in such Letters of Intent remains unavailable for other applicants and other locations less than 15 KM away from the location mentioned in a valid LOI also cannot be considered. If the entrepreneur is not serious, the farmers in the zone allocated to the proposed unit suffer for no fault of their own. Consumer interests too would be adversely affected. In order to safeguard the interests of farmers, industry and consumers, it is necessary that the licensed capacity is created to the intended time schedule. Accordingly, it has been now decided that the initial validity period of the LOIs granted for setting up new units of sugar should be reduced to one year and to prescribe some milestones, the fulfillment of which would be a precondition for further extension of the period of validity of LOI.

63. The following are considered as important milestones:—

(a) Acquisition of land for location of sugar mill.

(b) Commencement of Civil works.

(c) Placement of order for Plant & Machinery.

(d) Filling of application for term loan [if required].

64. The applicant should fulfil conditions 1 and 2, and one of the remaining two conditions and provide documentary evidence to that effect to the Administrative Ministry and the Approval Committee to qualify for further extensions of validity beyond one year. Requests for change of location, if any, would have to be filed within 3 months from the date of issue of LOI. In terms of this Press Note, the LOIs already issued would be valid for a period of one year from the date of issue of Press Note, or the present date of validity of the LOI, whichever is earlier. By yet another press note dated 15.6.1998, grant of extension in validity period of the Letters of Intent granted for setting up new Sugar Units was issued. If the LOIs could not be implemented because of the Court orders or proposals for entrepreneurs for change of location for the project that period was excluded while calculating the one year period. It is on 31.8.1998, by way of a press note No. 12, a very important policy decision in the establishment of sugarcane factory was taken by the Government of India. The Government after reviewing the list of industries retained under compulsory licensing, and has decided to delete sugar industry from the list of industries requiring compulsory licensing under the provisions of Industries [Development and Regulation] Act, 1951. However, in order to avoid unhealthy competition among sugar factories to procure sugarcane, a minimum distance of 15 KM would continue to be observed between an existing sugar mill and a new mill by exercise of powers under the Sugarcane Control Order, 1966. The entrepreneurs who wish to avail themselves for the de-licensing of the sugar industry would be required to file an Industrial Entrepreneur Memorandum [IEM] with the Secretariat of Industrial Assistance in the Ministry of Industry as laid down for all de-licensed Industries in terms of the Press Note dated 2.8.1991, as amended from time to time. Entrepreneurs who have been issued Letters) of Intent [LOI] for manufacture of sugar need not file an initial IEM. In such cases, the LOI holder shall only file part “B” of the IEM at the time of commencement of commercial production against the LOI issued to them. It is however open to the entrepreneurs to file an initial IEM [in lieu of the LOI/Industrial licence held by them] if they so desire, whenever any variation from the conditions and parameters stipulated in the LOI/Industrial license is contemplated.

65. In exercise of the powers conferred by sub-Section (1) of Section 29-B of the Industries [Development and Regulation] Act, 1951, the Central Government amended the notification of the Government of India in the Ministry of Industry [Department of Industrial Development] No. S.O 477(E) dated 25.7.1981 namely., in Schedule II to the said Notification, Item 4 relating to sugar and the entries thereunder shall be omitted. Thus, the sugar Industry was deleted from the list of industries requiring compulsory licensing under the aforesaid Act. From the Statement of Objections filed by the Central Government in these proceedings, it is clear at para-7 of the Allahabad High Court Kisan Shakari Chini Mills Ltd. v. Union of India (Supra), in their Judgment dated 1.2.2006 held that the minimum distance criteria of 15 km as mentioned in press note dated 31.8.1988 is directive in nature and not mandatory. The Delhi High Court in Oudh Sugar Mills Ltd. v. Union of India, (Supra) in their Judgment dated 22.12.2005 that the Press Note-dated 31.8.1988 provides for the minimum distance to be observed between an existing sugar mill and a new sugar mill and not between the two proposed sugar mills. In view of the said developments, expert advice of the Department of Legal Affairs was sought in the matter and they opined: “since there is no provisions regarding providing limitation of minimum distance between the two existing or proposed sugar mills in the Sugarcane [Control] Order, 1966, the Sugarcane [Control] Order, may be amended suitably.” On receipt of the above-advise of the Ministry of Law. this Department initiated the process to amend the Sugarcane [Control] Order, 1966. In the meantime, the Hon'ble Supreme Court vide its order dated 5.9.2006 in Balrampur Chini Mills Ltd. v. Ojas Industries Pvt. Ltd. (Supra) granted eight weeks time to Union of India to iron out some of the difficulties highlighted by the parties in these cases. After due consultation with the State Governments and other stake holders, the Sugarcane [Control] Order, 1966 was amended vide the order dated 10.11.2006, giving statutory backing to the concept of minimum distance. The order was made applicable from the date of its publication in the Official gazzette i.e, w.e.f 10.11.2006 The Apex Court Ojas Industries [P] Ltd. v. Oudh Sugar Mills Ltd. (Supra) upheld the validity of the Sugarcane [Control] [Amendment] Order, 2006 and held it is retrospective in nature. The Supreme Court also observed that these amendments are clarificatory in nature. Thus, the amendments to the Sugar [Control] Order, 1966 inserting Section 6-A to 6-E was only to giving statutory backing/recognition to the policy of the Government which was in vogue. In no way it affected the rights of persons, who wanted to establish new sugar factories from the Sugarcane growers. It is in these background when it is to overcome to a decision of the Allahabad High Court which has held this prescription of distance is only directory and not mandatory. When the Central Government faced such a piquant situation, on the advise of Law Ministry amended these Sugarcane [Control] Orders, incorporating clause 6-A to 6-E. The intention was to make these provisions mandatory and not directory. When the intention-is expressed in so unequivocal terms having regard to the orders passed by the Courts, the problems faced and the object of it, amendments was brought about and when the Apex Court declared that these amendments are only clarificatory in nature and therefore prospective. There is no ambiguity. Intention is to make these prescriptions mandatory, a rule of law and to enforce it. It is in these backgrounds, we have to appreciate the provisions, which were inserted by way of amendment to find out now, What is the Law, which occupies the establishment of new sugar factories in the country. The amended provisions are set out as under:—

6-A Restriction on setting up of two sugar factories within the radius of 15 km.— Notwithstanding anything contained in clause 6, no new sugar factory shall be set up within the radius of 15 km 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 km or different minimum distances not less than 15 km 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 6-C.

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 person concerned 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.

6-B. Requirements for filing the Industrial Entrepreneur Memorandum.— (1) Before filing the IEM with the Central Government, the concerned person shall obtain a Certificate from the Cane Commissioner or Director [Sugar] or specified authority of the State Government concerned 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 very Central Government or the State Government, as the case may be, and the person concerned 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 person concerned shall submit a performance guarantee of rupees 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 within the stipulated time or extended time as specified in clause 6-C failing which Industrial Entrepreneur Memorandum shall stand derecognised as far as provisions of this order are concerned.

6-C. 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 derecognised 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 State Government concerned, may give extension of one year exceeding six months at a time, for implementing the Industrial Entrepreneur Memorandum and commencement of commercial production thereof.

6-D. Consequences of non-implementation of the provisions laid down in clauses 6-B and 6-C. If an Industrial Entrepreneur Memorandum remains unimplemented within the time specified in Clause 6-C, the performance guarantee finished for its implementation shall be forfeited after giving the person concerned a reasonable opportunity of being heard.

6-E. Application of clauses 6-B, 6-C and 6-D to the person whose Industrial Entrepreneur Memorandum has already been acknowledged.—

(1) Except the period specified in sub-clause (2) of clause 6-B of this order, the other provisions specified in clauses 6-B, 6-C and 6-D shall also be application 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 clause 6-A.

(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 clause 6-A 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 person concerned shall stand derecognised as far as provisions of this order are concerned.”

66. An analysis of the aforesaid provisions would show what are the steps which an entrepreneur has to take in establishment of a sugar factory.

67. The first step in the establishment of a Sugar Factory as is clear from clause 6(B) is the requirements for filing the Industrial Entrepreneur Memorandum. Before filing the IEM with the Central Government, the concerned persons shall obtain a Certificate from the Cane Commissioner or Director [Sugar] or specified authority of the concerned State Government that, that the distance between the site 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 very Central Government or the State Government, as the case may be. Clause 6(a) emphatically states that notwithstanding anything contained in clause 6, no new Sugar Factory shall be set up within the radius of 15 Km of any existing sugar factory or another new sugar factory in a State or two or more States. After prescribing the minimum distance, the proviso to the said provision amplifies the intention of the Government. The proviso provides 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. The bottom line is 15 Kms. The 15 Km is prescribed for the entire country. In a particular State, if the State Government feels it would be the interest of the farmers to prescribe a higher minimum distance than what is prescribed for the country, they are so authorised subject to approval by the Central Government Therefore, this prescription of 15 Kms is the bare rninimum, it is mandatory. Under no circumstances, the said rule can be diluted. Therefore, the first step in the establishment of a new sugar factory is obtaining a distance certificate as provided under Clause 6-B(1).

68. The second step provided is after obtaining such distance certificate, the concerned person shall file the IEM with the Central Government within one month of issue of such certificate, failing which, the validity of the Certificate shall expire. Therefore, the law is clear and unambiguous. The validity period of distance certificate is only one month. If an IEM is not filed within one month from the date of obtaining distance Certificate, the validity of the Certificate shall expire. Thereafter, the person has to file an IEM, he has to obtain a fresh distance certificate. Therefore, a period of one month is prescribed for filing the IEM after obtaining a distance certificate.

69. After filing such IEM, the concerned person shall submit a performance guarantee of rupees one crore to Chief Director [Sugar], Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution Department, within 30 days of filing the IEM as a surety for implementation of the IEM within the stipulated time or extended time as specified in Clause 6-C, failing which, IEM shall stand derecognised as far as provisions of this order are concerned. This is the time limit i.e, within 30 days from the date of filing of IEM, a performance guarantee of rupees one crore is to be furnished for implementation of the IEM. It is made clear if the performance guarantee is not furnished within 30 days period, the IEMs shall stand derecognised. Section 6-C provides for time limit to implement IEM. Two years is the period prescribed for taking the effective steps and another two years is the time stipulated for commercial production. In other words, the commercial production shall commence within four years w.e.f the date of filing the IEM with the Central Government. The consequences of not commencing commercial production is also provided. The IEM shall stand de-recognised. If commercial production is not commenced within 4 years and consequently the performance guarantee shall be forfeited. The proviso added to this clause provides for extension of time. On the recommendation of the concerned State Government, the Chief Director [Sugar], Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution is authorised to give extension of one year not exceeding six months at a time for implementing the IEM and commencement of commercial production thereof. Therefore, two years period prescribed for taking effective steps from the date of IEM or 4 years for commencement of commercial production from the date of production could be extended by maximum period of one year. What is the effective steps to be taken by a person, who has set up a Sugar Factory is spelled out in clause 6-A at Explanation 4, it reads as under:—

Explanation 4.— The effective steps shall mean the following steps taken by the person concerned 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.

70. Clause 6-B provides for consequences of non implementation of the provisions laid down in Clause 6-B and 6-C. A IEM 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. What is of importance to be noticed herein is though Clause (c) provides for derecognition of the IEM and forfeiture of performance guarantee, if effective steps are not taken within the stipulated period since that only speaks of a notice to be given to the entrepreneur before forfeiting the performance guarantee. It is because in the event of not taking effective steps within two years from the date of IEM and within the extended period by operation of law, the IEM stands derecognised. Whereas in the case of forfeiture of performance guarantee law provides giving an opportunity to the entrepreneur and thereafter forfeiting the IEM. Therefore, before the performance guarantee is forfeited a positive order after hearing the entrepreneur is the requirement of law. Insofar as the de-recognition of IEM is concerned, the effective steps are not taken within the stipulated period, it is by an operation of law and no express order is contemplated from the authorities.

71. Clause 6A also defines what is an existing sugar factory; what is a new factory and explanation 3 in particular stipulates how the minimum distance of 15 Kms provided under clause 6A shall be determined. It provides that the minimum distance shall be determined as measured by the Survey of India and therefore no such certificate evidencing the distance between the proposed Sugar Factory and the existing or new Sugar Factory is recognised under law. The importance of the effective steps and the distance certificate is succinctly explained by the Apex Court in the case of Ojas Industries [P] Ltd. v. Oudh Sugar Mills Ltd. (Supra) in pragraphs 28, 29, 30 and 34 are as follows:—

“28. 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.

29. 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 6-A 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.

30. The Sugarcane (Control) (Amendment) Order, 2006 inserts Clauses 6-A to 6-E in Clause 6 of the Sugarcane (Control) Order, 1996. 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 is 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.

34. 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.”

72. Therefore, it is clear the concept of “distance” is different from the concept of “setting up of unit” as well as the concept of taking effective steps. The concept of taking effective steps that ‘setting up of unit’ is the main concern of the business. 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 policy and which has to take into account factors such as demand and supply. As this distance is based on a policy of the Government, which was reflected prior to amendment in the form of press note and when the judicial authority held this concept of distance is directory in nature, the Government of the day thought it fit to give statutory recognition to this concept of distance by amending the Sugarcane (Control) Order. Therefore, today the concept of distance though originated from the Government policy is no more a policy, which is a requirement of law, which has complete backing of a statutory force. This is a factor, which today Courts have to bear in mind while interpreting the concept of distance factor in finding out whether the establishment of a factory is in accordance with law. The Government was conscious on the day they were amending these rules in pursuance of the press note of 1988 by which time the Sugar Industry has been de-licensed number of IEMs were pending. Keeping those IEMs, which are pending on those day, the amendment came into force. Clause 6-E was introduced, which reads as under:—

6-E. Application of clauses 6-B, 6-C and 6-D to the person whose Industrial Entrepreneur Memorandum has already been acknowledged.— (1) Except the period specified in sub-clause (2) of clause 6-B of this order, the other provisions specified in clauses 6-B, 6-C and 6-D shall also be application 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 Clause 6-A.

(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 clause 6-A 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 person concerned shall stand derecognised as far as provisions of this order are concerned.”

73. Sub-clause (2) of clause 6B provided for submission of a performance guarantee of rupees one crore within 30 days of filing the IEM as a surety for implementation of the IEM. Otherwise, the consequences was it shall stand derecognised. Therefore, if IEM has been filed before amendment and if 30 days from the date of filing of the IEM has expired by virtue of the amended clauses of the pending IEMs would have stood de-recognised. The intention was to save such IEMs. Therefore, sub-clause (2) of clause 6E provided that, the person, whose IEM 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 within a period of 6 months of issue of this Notification, failing which, IEM of the concerned person shall stand de-recognised. In other words, though one month is the period prescribed for persons, who are filing IEM after the amendment persons, who had filed IEM prior to the amendment and who had not taken effective steps were given an opportunity to furnish performance guarantee of rupees one crore within 6 months from the date of the Notification. A concession was made to persons who have filed IEM. However, sub-clause (1) of clause 6E makes it clear but for the benefit of this period, the other provisions specified in clauses 6B, 6C & 6D shall be applicable to the persons whose IEM has already been acknowledged as on the date of notification, but who has not taken effective steps as specified in Explanation 4 to Clause 6A. In other words, insofar furnishing performance guarantee was concerned, a concession was shown to persons, who had already filed IEM by giving them 6 months time from the date of notification, but in all other respects i.e, insofar as the legal requirements prescribed under Clause 6A, 6B & 6C are concerned, it was made applicable mutatis & mutandis to all the pending IEMs. The effect of the provision is, if a person, who had filed IEM earlier to the Notification, if he has not taken effective steps he has to comply with the requirement of Section 6B and 6C, he would be liable for the consequences of non implementation of the provision laid down in 6B & 6C as stipulated in clause 6B. Therefore, even though clause 6B provide, the first step is obtaining a distance certificate and then within 30 days of issue of such certificate, failing which, validity of the distance Certificate shall expire. If already the IEM is filed, they shall produce the distance certificate within 30 days from the date of Notification. Otherwise, The IEM which had been filed prior to notification shall stand de-recognised. Similarly, if the distance Certificate is obtained beyond 30 days from the date of Notification it would have no life.

74. Similarly, the persons who had filed IEM prior to the date of notification had to implement the IEM within the period stipulated in Clause 6C to be calculated from the date of IEM or at least from the date of amendment. That is the purport and intention of Clause 6E. If the distance certificate is not produced within 30 days from the date of notification or if effective steps are not taken within 2 years from the date of filing of IEM and if no extension is sought for taking effective steps, if it had not been taken within 2 years, the IEM filed prior to the notification stands de-recognized. That is the legal position which flows from the aforesaid provisions.

75. It is in this background we have to find out whether Shivashakthi Sugars have set up the sugar factory in compliance with these amended provisions which are retrospective as held by the Apex Court.

POINT No. 1:— IS THERE A VALID IEM FILED IN ACCORDANCE WITH THE SUGARCANE CONTROL ORDER?

76. It is not in dispute that Shivashakthi Sugars filed their IEM on 8.6.2006 Though there was an obligation on their part to maintain a distance of 15 Kms from the existing sugar factories and set up a new sugar factory beyond 15 Kms, there was no requirement of enclosing a distance certificate along with IEM as now prescribed under Clause 6D. Therefore, no distance certificate was enclosed to the said IEM filed on 8.6.2006 Now it is also not in dispute that on 10.11.2006 when the Sugarcane Control Order was amended they also had not taken effective steps. Therefore, they were legally bound to comply with sub-clause (2) of Clause 6E, i.e, furnishing of a performance guarantee of Rs. 1 Crore within six months from the date of the Notification. Accordingly, they furnished the performance guarantee on 7.5.2007 within 6 months from the date of notification. In view of the fact Clause 6E made Clause 6B applicable to IEM which had already been acknowledged there was a statutory obligation on their part to furnish a certificate from the Cane Commissioner or Director of Sugars or Specified Authority of the concerned State Government stating that the distance between the site where the proposal to set up sugar factory and adjacent existing sugar factories and new sugar factories is not less than the minimum distance of 15 Kms. The said certificate ought to have been furnished within 30 days from the date of notification. It is not in dispute that no such certificate was furnished within 30 days from the date of Notification.

77. On record we have the certificate dated 5.6.2006 certifying that Shivashakthi Sugars Limited is a holder of LOI for establishment of sugar factory proposed at Saundati Village, Raibag Taluk in Belgaum District and there are no sugar industries existing within the radius of 15 Kms of the proposed site as per the report cited at reference above. The reference shows that the Assistant Commissioner, Chikodi Division, Chikodi, has given the said information in his letter dated 3.6.2006 This certificate is issued by the Commissioner for Cane Development and Sugar in Karnataka. Even if this is the certificate filed along with the IEM filed on 8.6.2006, the said certificate do not satisfy the legal requirements prescribed under Clause 6B. The requirement of Clause 6B is 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 sugar factories and new sugar factories is not less than the minimum distance by the prescribed Central Government or State Government. Therefore, necessarily the said certificate would state what is the distance between the existing sugar factory, new sugar factory and the proposed sugar factory and only if that measurement shows that the proposed sugar factory is beyond the 15 Kms then he can file an IEM enclosing the said factory. In the certificate which is dated 5.6.2006 what is stated is there are no existing sugar factories within a radius of 15 Kms. That apart Clause 6A after defining what is an existing sugar factory, a new sugar factory, in explanation 3 prescribes that the minimum distance shall be determined as measured by the Survey of India. Therefore, the basis for a certificate being issued by a competent authority should be the measurement conducted by the Survey of India and not the Assistant Commissioner as was done in the aforesaid document. It is because of this legal requirement it is clear that Shivashakthi Sugars approached the Survey of India on 14.6.2007 deposited a sum of Rs. 5,000/- for issue of a distance certificate as per Annexure-R32 produced in the case. This distance certificate ought to have been produced within 30 days from 10.11.2006, i.e, 10.12.2006 whereas it is on 14.6.2007 they have approached the Survey of India. Annexure-R33 is the letter dated 16.7.2007 addressed by Survey of India to Shivashakthi Sugars Limited which reads as under:—

“The approximate aerial distances between the existing and proposed sugar factories mentioned in your letter referred as above are given in the annexure:—

2. The distances are determined from the Topo Maps of the area on which the locations of existing and proposed sugar factory sites were marked and submitted by you.

3. This office is not responsible for the correctness of the positions of the sites marked by you on the maps and the address of the existing factory, etc., as these not verified by our department”.

And to that letter they enclosed an annexure which is as under—

Sl. No.Addresses/Location of existing Sugar factories (From)Addresses/location of proposed sugar factories (To)Aerial distance in KmSheet No.1Raibag SSKN Raibag, Taluk, Dist. Belgaum (Closed)M/s. Shivashakti Sugar's Ltd., Saundatti, Taluk Raibag, Dist. Belgaum15.447L/15 47L/102Anandi Sugars Ltd., Kankanwadi, Taluk Raibag, Dist. Belgaum (Proposed)M/s. Shivashakti Sugar's Ltd., Saundatti, Taluk Raibag, Dist. Belgaum31.347L/15

3Bhagyashree Lagamawa Sugar Works, Alagawadi, Taluk Raibag Dist. Belgaum (Proposed)M/s. Shivashakti Sugar's Ltd., Saundatti, Taluk Raibag, Dist. Belgaum19.147L/154Ugar Sugar Works Ltd., Ugar (KH) Taluk Athani Dist. Belgaum (Existing)M/s. Shivashakti Sugar's Ltd., Saundatti, Taluk Raibag, Dist. Belgaum15.147L/145Shree Doodhaganga Krishna S.S.K.N (Nandi) Chikkodi Dist. Belgaum (Existing)M/s. Shivashakti Sugar's Ltd., Saundatti, Taluk Raibag, Dist. Belgaum15.047L/11

78. The Survey of India which is the 7 respondent has filed a counter. In the counter they have categorically stated at para 3 that they issued a distance certificate based on the data provided by the indenter, the accuracy of marking of location on topo map lies with the indenter and they as such do not have responsibility of liability regarding such a certificate issued by them. They have also stated since 1:50,000 scale maps are used for determination of horizontal distance, a shift of one dot in the map for the location of sugar mills marked on it will have a shift of 12.5 meters only in the ground. In the procedure which is prescribed which is also reflected in the statement of objections they have stated that the indenter should have marked the existing and proposed sugar factories whose distances are required on original/xerox copy of the topographical map and submit it with an application and required amount of fee in the form of demand draft. The indenter has to mention the name and location of the sugar factories from where the distances are required. After receiving the application from the indenter, Survey of India will find out the distances from the existing topographical maps. The distances are calculated from the marked portions, which generally meet the required accuracy.

79. Therefore, it is obvious that the Survey of India has not determined the distance by conducting measurement independently They have gone by the topo maps where Shivashakthi Sugars have pointed out where the existing sugar factory and the new sugar factory to be set up are situated without making any independent measurement. Therefore, in the letter Annexure-R33 they are categorical in stating that they are not responsible for the correctness of the positions of the sites marked by Shivashakthi Sugars on the maps and the addresses of the existing factory, etc., as they were not verified by the Department Neither the sugar factories nor the seventh respondent have produced before this Court the said topographs to show the marking which is the basis for measurement In this context it is relevant to notice in the IEM which is filed on 8.6.2006 it is clearly mentioned that Saundatti is the place where they intend setting up the sugar factory. Therefore, in the topograph they could only point out a place in Saundatti as the place where they want to set up a sugar factory. It is from that point this 15 Kms is to be measured by the Survey of India. The distance between Shivashakthi Sugars and the Doodhaganga sugar factory as is clear from the annexure to the aforesaid letter is exactly 15 Kms. In so far as Raibagh sugar factory is concerned, it is 15.4 Kms.

80. In the application for amendment filed to the writ petition in W.P No. 66920/2010 where it is asserted that No Objection Certificate was given only to Soundatti Village and not Yadrav village. In reply to the same, Shivashakti Sugar have stated in their objection that both Yadrav village and Soundatti Village are abutting to each other. On perusal of the approved plan, it shows that the factory is spread over in both villages. The entrance to Doodganga sugar factory is only in Soundatti village and other portion of the factory in Yadrav village. Therefore, it is clear, the entrance to Doodganga Sugar Factory is from Soundatti village and in Soundatti Village no sugar factory is situated. The sugar factory is in Yadrav Village. IEM is filed for setting up sugar factory at Soundatti Village and not at Yadrav Village. Therefore, the measurement ought to have been taken if at all from Yadrav Village where the factory is situated and as no IEM is filed for setting up a sugar factory at Yadrav Village, the Distance Certificate issued by the Cane Commissioner and the measurement made by the Survey of India in the light of these undisputed facts do not depict the correct state of affairs. Moreover, from the map of the Taluk which is produced before the court, it is clear, Yadrav Village is situated in between Soundatti Village and Bavachi Village where Raibagh Sugar Factory is situated, between Saundatti Village and Nandi Village where Doopganga Sugar Factory is situated. Therefore, the Yadrav village is nearer to these places when compared to Saundatti village and therefore, not only the said measurement is inaccurate, even if it is to be held as correct, the factory which is situated is well within 15 kms. from the place of the existing factories. Probably, realizing this difficulty, an alternative argument is put forth i.e, both Doodganga Sugar Factory as well as Raibagh Sugar Factory have issued no objection certificate stating, they have no objection for establishment of sugar factory at Soundatti village. Therefore, they contend, it is not open to them to challenge the establishment of the sugar factory at Saundatti. At this length of time, even if these measurements are to be taken to be correct, issued by the appropriate authority, no objection is issued to set up a sugar factory at Saundatti, whereas the sugar factory is now set up at Yadrav village. Therefore, the said no objection certificate has no relevance.

81. That apart, the prescription of 15 kms. distance between an existing sugar factory and a new sugar factory to be set up is provided under a statute. It is well settled that parties by consent, by agreement cannot nullify the legal requirement of a statutory provision. Therefore, the said No Objection Certificate has no value in the eye of law. On the contrary, the very fact that those two no objection certificates are obtained shows that the sugar factory comes within 15 kms. and unless they gave no objection certificate, it is not possible to set up the sugar factory at Soundatti. Therefore, it supports the case of the petitioners that the sugar factory is established within 15 kms. in utter violation of the statutory provisions.

82. Yet another argument canvassed was that this Raibagh Sugar Factory is not an existing sugar factory as defined under Clause 6A of the Sugarcane (Control) (Amendment) Order, 2006, and therefore, mandatory requirement contained in Clause 6A is not attracted. In support of that contention, it was pointed out, the Raibagh Sugar Factory has stopped crushing activity in the year 2001-2002, Explanation (1) to Clause 6A defines, what is the existing sugar factory, which reads as under:

“Explanation (1): An existing sugar factory shall mean, (a) a sugar factory in operation, (b) a sugar factory that has taken all effective steps as specified in Explanation 4 to set up a sugar factory and (c) a sugar factory though has stopped crushing operations less than 5 sugar seasons.”

83. Relying on this definition, it was contended, as Raibagh Sugar Factory has stopped crushing operations from the year 2001-2002, the question of measuring 15 kms. from that factory would not arise. It is in that context, it was contended, the 5 years period is to be computed not from the date of filing of the IEM, 5 years period either from the date the State Government passed an order allocating 21 villages to Shivashakti Sugars Ltd., which is dated 04.08.2007 or if it is from the date of setting up of the industry.

84. In that connection, learned counsel for the Shivashakti Sugars Ltd., relied on Commissioner of Wealth Tax, Madras v. Ramaraju Surgical Cotton Mills Ltd. . AIR 1967 SC 509 V 54 C 105 At Para 3, it is held as under:—

“3. The High Court held that unless a factory is erected and the plants and machinery installed therein, it cannot be said to have been set up. The resolution of the Board of Directors, the orders placed for purchasing machinery, licence obtained from the Government for constructing the machinery, are merely initial stages towards setting up, however necessary and essential they may be to further the achievement of the end. It is not, however, the actual functioning of the factory or its going into production that can alone be called setting up of the factory. The setting up is perhaps a stage interior to the commencement of the factory. Thereafter, the High Court referred to a decision of the Bombay High Court in Western India Vegetable Products, Ltd. v. Commr. of Income-tax, Bombay City, 1954 26 ITR 151 : (AIR 1955 Bom 13) and on its basis, concluded that the proper meaning to be assigned to the expression “set up” in Section 5(1) (xxi) would be “ready to commence business”. We are unable to agree with the learned counsel for the Commissioner that in arriving at this view, the High Court committed any error. A unit cannot be said to have been set up unless it is ready to discharge the function for which it is being set up. It is only when the unit has been put into such a shape that it can start functioning as a business or a manufacturing Organisation that it can be said that the unit has been set up. The expression used in the proviso, under which the period for which the exemption is available is to be determined, is not the same as used in the principal clause. In the proviso, the period of five successive years of exemption has to commence with the assessment year next following the date on which the company commences operations for the establishment of the unit. Operations for the establishment of a unit, from the very nature of that expression, can only signify steps that have to be taken to establish the unit. The word “set up” in the principal clause, in our opinion, is equivalent to the word “established”, but operations for establishment cannot be equated with the establishment of the unit itself or its setting up. The applicability of the proviso has, therefore, to be decided by finding out when the company commenced operations for establishment of the unit, which operations must be antecedent to the actual date on which the company is held to have been set up for purposes of the principal clause. This is also the meaning that the Bombay High Court derived in the case of Western India vegetable Products Ltd., 1954-26 ITR 151 : (AIR 1955 Bom 13) (supra) where that Court was concerned with the interpretation of the expression “set up” as used in Section 2(11) of the Income-tax Act. That Court held:

“It seems to us that the expression “setting up” means, as is defined in the Oxford English Dictionary, “to place on foot” or “to establish”, and is contradistinction to “commence”. The distinction is this that when a business is established and is ready to commence business, then it can be said of that business that it is set up. But before it is ready to commence business it is not set up.”

This view was expressed when that Court was considering the difference between the meaning of the expression “setting up a business” and “commencing of a business”. In the case before us, the proviso does not even refer to commencement of the unit. The criterion for determining the period of exemption is based on the commencement of the operation for the establishment of the unit. These operations for establishment of the unit cannot be simultaneous with the setting up of the unit, as urged on behalf of the Commissioner, but must precede the actual setting up of the unit. In fact, it is the operations for establishment of a unit which ultimately culminate in the setting up of the unit.”

85. Again, the Apex Court in the case of Kabini Kabini Minerals (P) Ltd. v. State of Orissa . 2006 1 SCC 54 where it has been observed at Paras 8, 9 and 10 as under:—

“8. Appellant 1 had also not set up an industry. It had merely entered into an agreement for purchasing the land and placed orders for the machineries. The expression “setup” has a definite connotation of its own.

9. The expressions “setting up” means, as is defined in the Oxford English Dictionary, “to place on foot” or “to establish”, and is in contradistinction to “commence”. The distinction is this that when a business is established and is ready to commence business, only then it can be said of that business that it is set up. But before it is ready to commence business it is not set up. (See CWT v. Ramaraju Surgical Cotton Mills Ltd.)

10. In the said case, it was further held that the word “set up” is equivalent to the word ‘established’ but operations for establishment cannot be equated with the establishment of the unit itself of (sic or) its setting up.”

86. Relying on the judgments it was contended, ‘setting up’ is equivalent to the word ‘established’ and operations for the establishment cannot be equated to the establishment of the unit itself on its setting up. Therefore, as the sugar factory is now established, this 5 years period is to be computed from 2010 onwards or 5 years, during which period, admittedly, the crushing activity has not taken place.

87. We do not see any substance in the said contention. Having regard to the scheme of the Sugarcane Control Order and in view of the expressed words used in Clause 6B, the concerned person shall obtain a certificate from the appropriate authority to the effect that 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. Therefore, the distance of 15 kms. is to be measured even before filing of the IEM. Therefore, this 5 years period prescribed should be calculated from the date and anterior to the date of filing of the IEM. If 5 years is calculated anterior to date of IEM, in this case, the crushing activity has not been stopped for 5 years and therefore, it cannot be said, Raibagh Sugar Factory was not in existence at all. That apart, the material on record discloses, the crushing activity of sugar factory was stopped in the year 2001-2002. But thereafter, an attempt was made to revive the sugar factory. The Government was successful in partially reviving the sugar factory. We have on record a letter addressed by the Raibagh Sugar Factory to the Commissioner for Cane Development on 02.01.2004 submitting, the final manufacturing report for the season 2003-2004 in the prescribed RT8(C) under Rule 83, which document is not in dispute. The said report discloses, for the season 2002-2003, cane crushed is 72,596.39 quintals and for the season 2003-2004, it is 1,621.893 metric tons. Therefore, it is clear, a small extent of cane was crushed for the season 2003-2004, whereas the IEM was filed on 08.06.2006 and it cannot be said that Raibagh Sugar Factory was not an existing factory at all. Therefore, this argument that there was no obligation to maintain 15 kms. distance from Raibagh Sugar Factory as it was not an existing sugar factory at all, is untenable. That apart, that argument looses sight of the fact that Doodganga Sugar Factory is situated even nearer than Raibagh Sugar Factory to the Sugar Factory intended to be set up at Soundatti. Therefore, the said argument has no substance.

88. In the light of these material on record, it is clear that though IEM was filed prior to 11.10.2006, amendment to the Sugar Cane Control Order and along with the said IEM, the certificate was filed which is dated 05.06.2006 certifying that no sugar factory exists within 15 kms. from the place the proposed sugar factory at Soundatti. In view of the amended provisions being retrospective, the said certificate not being in conformity with the certificate stipulated under Clause 6B, it is of no assistance. The certificate as prescribed under Clause 6B ought to have been produced within 30 days from the date of notification and admittedly, it has not been done and therefore, the consequences flowing from such non production of the Distance Certificate, the IEM filed prior to the amendment of the Rules ceases to exist. Even thereafter, when certificate is obtained, it does not pass the test of the legal requirements. At any rate, all these certificates refer to establishment of a sugar factory at Saundatti village and when no sugar factory is established at Yadrav village in respect of which no IEM is filed as on this date and the material on record clearly points out that the Soundatti Village as well as Yadrav Village falls within the 15 kms. as contemplated under Clause 6A of the Act and no sugar factory could have been established within the prohibited area.

89. As already discussed, the first step in the establishment of the sugar factory is obtaining Distance Certificate as stipulated in Clause 6B. After obtaining a Distance Certificate within 30 days therefrom, an IEM has to be filed. After filing of an IEM and its acknowledgement as per Clause 6C, effective steps have to be taken for implementation of the IEM within two years from the date of IEM. The date of IEM is 08.06.2006 Two years prescribed expires on 08.06.2008 Now, the question for consideration is whether effective steps as contemplated in Explanation 4 to Section 6A has been taken.

IS LAND REQUIRED FOR SETTING UP INDUSTRY ACQUIRED?

90. It is clear from the explanation 4, the first effective step to be taken is purchase of required land in the name of the factory. As is clear from the words used, two things assumes importance. The first is purchase of the required land and second is such a purchase is to be in the name of the factory to be set up. It is in this context, the specific case pleaded by the Shivashakti Sugar Limited is that they have purchased in all 73.29 acres of land in Saundatti village, Raibagh District of Belgaum Taluk. This is what they have said in the quarterly progress report submitted by them to the Director (Cost) Government of India, Ministry of Consumer Affairs, Food and Public Distribution. As the said fact was disputed by the petitioners at the time of arguments, they have produced documents to substantiate the said claim. The first document which is produced is Annexure R41. The order passed by the Deputy Commissioner, Belgaum District dated 28.10.2006 granting permission under Section 109 of the Karnataka Land Reforms Act, 1961 in respect of land bearing Re. Sy. Nos. 95/2, 95/3, 98/3/2, 99/1A and 99/1B dated 20.12.2006 measuring in all 17 acres 32 guntas situate in Yadrav Village. Yet another order passed by the Deputy Commissioner of Belgaum which is dated 20.01.2007 granting permission to purchase land bearing Re. Sy. Nos. 5/16/15/2, 6/3, 6/4, 7/1, 98/1 situated in Yadrav village and land bearing Sy. No. 177/3 in Saundatti Village in all measures 38 acres 11 guntas i.e, they were granted permission to purchase 56 acres 3 guntas. However, no sale deed is produced showing purchase of these lands in the name of Shivashakti Sugars. However, they have produced sale deed dated 30.11.2007 in respect of which Sy. Nos. 92/1 B/2 measures 1 acre 37 guntas, sale deed dated 30.04.2007 in respect of land bearing Sy. No. 92/2 measuring 5 acres 8 guntas and sale deed dated 30.11.2007 showing purchase of land bearing Sy. No. 99/2 Ameasuring 2 acres 30 guntas, thus, in all, 9 acres 35 guntas. In the aforesaid 3 sale deeds produced, the recitals therein make it clear that the said lands were purchased with an intention to set up the sugar factory at Yadrav village and not at Saundatti. Therefore, the aforesaid sale deeds do not show that the said lands were purchased in the name of the Shivashakti Sugars for purposes of establishment of a sugar factory at Saundatti which is the requirement to be complied with as per Clause 6A to Explanation 4. That apart, the Doodganga Sugars, in order to show that the aforesaid survey numbers which claims to have been purchased for setting up sugar factory at Soundatri is not situated in Saundatti village, have produced the Record of Rights in respect of those Sy. Nos. showing the name of the owners of the said land. The said documents discloses that those properties stand in the names of Jakate Annasaheb Eshwar, Mahara Maruthi Bhujappa, Ranavalle Raheemana Mammulal, Tambata Moula Daadu, Tambata Ramzana Moula, Mohite Babasaheb Balavantharao, Patil Babu Tathyasaab, Patel Appusab Tathyasaab, Patil Annappa Tathyasaab, Patel Bheemugouda Tathyasab, Patil Vasantha Tathyasab, Kore Kallappa Erappa, Bane Adevappa Babu, In fact, in the entire correspondence which is made by the Shivashakti Sugar Factory Ltd., with all the Government authorities they have represented that all these lands are situated in Soundatri village and are purchased by them and they have put up the new sugar factory in the said land.

91. After all these, in the course of arguments, it is said that existing land bearing Sy. No. 177/3 measuring 1 acre 17 guntas and 178.A1 measuring 5 acres 3 guntas, the two extents of land falls within the Saundatti village and all the rest of the survey numbers fall within Yadrav village. As stated in the earlier part of the order, full opportunity was given to the parties to produce all the documents to substantiate their claim. Though Shivashakti Sugars Ltd., have produced number of documents including the aforesaid order granting permission and the three sale deeds, they have not produced the sale deeds showing the purchase of the aforesaid lands in the name of Shivashakti Sugar Ltd., In this context, it is necessary to know the provisions of the Karaataka Land Reforms Act as well as the provisions of the Karnataka Land Revenue Act.

92. Sections 79-A &79-B of the Karnataka Land Reforms Act, 1961 prohibits acquisition of land by certain persons which reads as under:

“79-A. Acquisition of land by certain persons prohibited — (1) On and from the commencement of the Karnataka Land Reforms (Amendment) Act, 1995, no person who or a family or a joint family, which has an assured annual income of not less than rupees two lakhs from sources other than agricultural lands shall be entitled to acquire any land whether as land owner, landlord, tenant or mortgagee with possession or otherwise or party in one capacity and partly in another.

(2) For purposes of sub-section (1) —

(i) the aggregate income of all the members of a family or a joint family from sources other than agricultural land shall be deemed to be income of the family or joint family, as the case may be, from such sources;

(ii) a person or a family or a joint family shall be deemed to have an assured annual income of not less than rupees two lakhs from sources other than agricultural land on any day if such person or family or joint family had an average annual income of not less than rupees two lakhs from such sources during a period of five consecutive years preceding such day.

Explanation:— A person who or a family or a joint family which has been assessed to income tax under the Income Tax Act, 1961 (Central Act 43 of 1961) on an yearly total income of not less than rupees two lakhs for five consecutive years shall be deemed to have an average annual income of not less than rupees two lakhs from sources other than agricultural lands:

(3) Every acquisition of land otherwise than by way of inheritance or bequest in contravention of the section shall be null and void,

(4) Where a person acquires land in contravention of sub-section (1) or acquires it by bequest or inheritance he shall within ninety days from the date of acquisition, furnish to the Tahsildar having jurisdiction over the Taluk where the land acquired or the greater part of it is situated a declaration containing the following particulars, namely:—

(i) particulars of all lands;

(ii) the average annual income of himself or the family;

(iii) such other particulars as may be prescribed.

(5) The Tahsildar shall, on receipt of the declaration under sub-section (4) and after such enquiry as may be prescribed send a statement containing the prescribed particulars relating to such land to the Deputy Commissioner who shall, by Notification, declare that with effect from such date as may be specified in the notification, such land shall stand transferred to and vest in the State Government without further assurance free from all encumbrances. From the date specified in such notification the Deputy Commissioner may take possession of such land in such manner as may be prescribed.

(6) For the land vesting in the State Government under sub-section (5), where the acquisition of the land was by bequest or inheritance, an amount as specified in Section 72 shall be paid and where the acquisition was otherwise than by bequest or inheritance, no amount shall be paid.

79-B. Prohibition of holding agricultural land by certain persons — (1) With effect on and from the date of commencement of the Amendment Act, except as otherwise provided in this Act, —

(a) no person other than a person cultivating land personally shall be entitled to hold land; and

(b) it shall not be lawful for,

(i) an educational, religious or charitable institutions or society or trust, other than an institution or society or trust referred to in sub-section (7) of section 63, capable of holding property;

(ii) a company;

(iii) an association or other body of individuals not being a joint family, whether incorporated or not; or

(iv) a co-operative society other than a co-operative farm, to hold any land.

(2) Every such institution, society, trust, company, association, body or co-operative society;

(a) which holds lands on the date of commencement of the Amendment Act and which is disentitled to hold lands under sub-section (1), shall, within ninety days from the said date furnish to the Tahsildar within whose jurisdiction the greater part of such land is situated a declaration containing the particulars of such land and such other particulars as may be prescribed; and

(b) which requires such land after the said date shall also furnish a similar declaration within the prescribed period.

(3) The Tahsildar shall, on receipt of the declaration under sub-section (2) and after such enquiry as may be prescribed, send a statement containing the prescribed particulars relating to such land to the Deputy Commissioner who shall, by notification, declare that such land shall vest in the State Government free from all encumbrances and take possession thereof in the prescribed manner.

(4) In respect of the land vesting in the State Government under this Section an amount as specified in Section 72 shall be paid.

Explanation: For purposes of this section it shall be presumed that a land is held by an institution, trust, company, association or body where it is held by an individual on its behalf.”

93. Therefore, a company formed for the purpose of setting up of sugar factory is entitled to acquire any land whether as a land owner, landlord, tenant or mortgagee in possession or otherwise. Therefore, Section 109 of the Karnataka Land Reforms Act provides for exemptions being granted by the Government from the application of Section 79A and 79B. That is the reason why the company applied for such exemption under Section 109 and obtained the exemption. But mere obtaining permission to purchase agricultural land does not amount to purchase of agricultural land in the name of the factory. In fact, the aforesaid three sale deeds were registered even without such permission on the ground, for purchase of the said lands Sections 81(1)(d) of the Karnataka Land Reforms Act grants exemption. It reads as under:

“The sale of any land in favour of a sugar factory for purposes of research or seed farm or sale in favour of the Coffee Board constituted under the Coffee Act, 1942.”

94. The condition precedent is that application of the said provision on the date of the sale of sugar factory should be in existence. The sale deed is dated 30.11.2007 No sugar factory had been set up as on that date. Therefore, claiming exemption under Section 81 (1)(d) and purchasing the land is clear contravention of the provisions of Sections 79A and 79B of the Act. As is clear from the said sale deeds, the said land was purchased for purposes of achieving the said object i.e, Reserarch and Seed Formation and further purchaser intended to set up a sugar factory at Yadrav. Be that as it may. The material on record does not disclose that Shivashakti Sugars Ltd., had purchased the required land in the name of the factory to set up sugar factory at Soundatti Village, the place where they intended to set up a factory as per the IEM. Therefore, the declaration made by them in the prescribed form is incorrect and it cannot be said, in the light of the aforesaid material that the Shviashakti Sugars Ltd., had taken effective steps for purchase of the required land in the name of the factory within two years period prescribed under law from the date of filing of the IEM.

95. Even if agricultural land is purchased after obtaining permission from the Government, before it is used for industrial purpose, i.e, setting up of a sugar factory, the permission of the Government for user of the agricultural land for industrial purpose is required.

96. Section 95 of the Karnataka Land Revenue Act, 1964 states that for use of agricultural land and the procedure for use of agricultural land for other purposes. It reads as under:

“Sec. 95: Uses of agricultural land and the procedure for use of agricultural land for the other purpose:

(1) Subject to any law for the time being in force regarding erection of buildings or construction of wells or tanks an occupant of land assessed or held for the purpose of agriculture is entitled by himself, his servants, tenants, agents, or other legal representatives, to erect farm buildings, construct wells or tanks, or make any other improvements thereon for the better cultivation of the land or its more convenient use for the purpose aforesaid.

(1) If any occupant of land assessed or held for the purpose of agriculture wishes to divert such land or any part thereof to any other purpose, he shall apply for permission to the Deputy Commissioner who may, subject to the provisions of this section and the rules made under this Act, refuse permission or grant it on such conditions as he may think fit:

Provided that the Deputy Commissioner shall not refuse permission for diversion of such land included in the (Master Plant) published under the Karnataka Town and Country Planning Act, 1961 (Karnataka Act 11 of 1963), if such diversion is in accordance with the purpose of land use specified in respect of the land in such plan;

(2) Permission to divert may be refused by the Deputy Commissioner on the ground that (that the diversion is likely to defeat the provisions of any law for the time being in force or that it is likely to cause a public nuisance) or that it is not in the interests of the general public or that the occupant is unable or unwilling to comply with the conditions that may be imposed under sub-section (4).

97. In the instant case admittedly Shivashakti Sugars Limited sought permission of the Government under Section 109 of the Karnataka Land Reforms Act for purchase of agricultural lands to set-up a sugar factory as under the Act they were disentitled to purchase the agricultural lands without such permission. Though they contend that they have purchased about 77.31 acres of land, the registered sale deeds under which the said agricultural lands purchased is not forth coming. Even after such purchase of agricultural lands, as the purpose of purchase is not to carry on agricultural activities but to use the agricultural lands for setting up a sugar factory — a non-agricultural use. They were under legal obligation under Section 95(2) of the Karnataka Land Revenue Act to obtain permission from the Deputy Commissioner for such diversion of land use. The material on record do not disclose that any application is made under Section 95(2) of the Karnataka Land Revenue Act, 1964 for such diversion of land use once from agricultural use to industrial use nor any such permission has been granted under the Act by the Deputy Commissioner. No building could be constructed on an agricultural land and no industry can be set-up on agricultural land without such permission from the Deputy Commissioner.

98. In this regard, it is necessary to refer to a Judgment of the Apex Court dealing with this issue in the case of State of Karnataka v. Shankar Textiles Mills Limited . 1994 INDLAW SC 2100 wherein it has been held as under:

“7: The obvious purpose of this section is to prevent indiscriminate conversion of agricultural land for non-agricultural use and to regulate and control the conversion of agricultural land into non-agricultural land. Section 83 of that Act provides for different rates of assessment for agricultural and non-agricultural land. That provision strengthens the presumption that agricultural land is not to be used, as per the holder's sweet will, for nonagricultural purposes. This is also clear from the absence of any provision under the Act requiring permission to convert non-agricultural land into agricultural land. In a country like ours, where the source of livelihood of more than 70 percent of the population, is agriculture, the restriction placed by the Revenue Act is quite understandable. Such provisions and restrictions are found in the Revenue Acts of all the States in the country. The provision has, therefore, to be construed as mandatory and given effect to as such”.

99. The Apex Court has held the said provision is to be construed as mandatory and give effect to as such. The said provision has been incorporated with the obvious purpose of preventing the indiscrimination conversion of agricultural land into non-agricultural use and regulate and control the conversion of agricultural land into non-agricultural land which strengths the presumption that agricultural land need be used for non-agricultural purpose. Therefore, there is a contravention of Section 95(2) of the Karnataka Land Revenue Act, 1964 and no order of conversion is obtained to this day.

PLACEMENT OF FIRM ORDER FOR PURCHASE OF PLANT AND MACHINERY FOR THE FACTORY

100. The second requirement to show the effective steps is, placement of the firm order for purchase of plant and machinery for the factory and payment of requisite advance for opening of the irrevocable letter of credit to the suppliers. It is nobody's case that Shivashakti Sugars Ltd., had opened an irrevocable letter of credit to its suppliers. It is their specific case that, they have placed orders for purchase of the plant and machinery and they have been paid requisite advance. Whether such an effective steps had been taken is required to be considered from the material on record.

101. In the quarterly progress report under the heading of purchase of plant and machinery it is categorically stated that they have placed orders with M/s. Kay Bouvet Engineers Pvt. Limited, Pune. The cost of the equipment is Rs. 21.25 crores, a sum of Rs. 2.05 crores is paid as advance. The said payment is made on 14.5.2008 and the expected date of delivery is after completion of the civil work. The date of installation/likely date of installation as September 2009. Further it is also stated as under:

Name of the equipmentName of the supplier(s) with whom orders have been placedcost of equipmentsAdvance/final amount paid to supplierscheque/draft No. and dateExpected date of deliveryDateRemark installation/likely date of installation(1)(2)(3)(4)(5)(6)(7)(8)Boiling House & Allied MachineryM/s Kaybouvet Engineering (P) Ltd, PuneRs. 21.25CrRs. 2.05crs14.05.08 after completion of civil workSept 2009a) Name of the equipments already purchased during the previous quarterNILb) Name of the equipments purchased during the current quarterNILc) Name of the equipments purchased upto the end of current quarterNILd) Name of the equipments already installed during the previous quarterNA

(1)(2)(3)(4)(5)(6)(7)(8)e) Name of the equipments installed during the current quarterNAf) Name of the equipments installed upto the end of current quarter (d) + (e)NA

102. From the aforesaid particulars furnished it is their case that they have placed orders with M/s. Kay Bouvet Engineers Pvt. Limited, Pune and in support of that, they have produced the letter of intent for sugarmills project. It reads as under:

“SHIVASHAKTI SUGARS LIMITED

Ref: SSS/BH/07Date: 05/11/07

Messrs. Kay Bouvet Engineering Pvt Limited

Mayfair Eleganza B-7, NIBM Road, Kondhwa

PUNE-411048.

Kind Attention Mr. Y.G Kunjir, General Manager

Dear Sir,

Sub: Letter of Intent for Boiling House of our Sugar Mill Project — Reg.

Ref Your Various Technical Discussions & Datas submitted with Sosam Sugar Consultancy.

We are pleased to place our letter of Intent for Boiling House as per the discussion we had with you as follows for our Sugar Mill.

Sl. No.DescriptionPriceOption A.Complete Boiling House as per the technical discussions with Sosam Sugar Consultancy and technical datas submitted by you, excluding Two Continuous Vacuums of 36-t and 25-t with Two receiving Crustallizer, Two Condenser and Vapour Piping between Continuous Pan and Condenser & Automation for pansRs. 20,25,00,000-00 (Rupees Twenty Crore and Twenty Five Lakhs Only)B.Complete Boiling House as above including Continuous Pan PackageRs. 21,25,00,000-00 (Rupees Twenty One Crore and Twenty Five Lakhs only)

Price: Above price Includes Basis Price, Packing, forwarding, Freight, Handling charges at site, Erection and Commissioning etc., (Turn Key Basis). All Taxes Duties, i.e Excise Duty, Sales Tax against Form C, Service Tax, Insurance and any other levies will be paid extra.

Validity: Above all inclusive price is firm and supplier is not entitled to any price escalation.

Payment and Commercial Terms:

• 10% Advance along with Commercial Agreement

• 10% after submsion of load data & layout drawing

• 05% On submission of purchase orders of all bought-outs

• 70% against proforma Invoice based on the sequence of erection and the material should reach within 7-10-days from the date of payment

• 5% against submission of Performance Bank Guarantee for two seasons

Erection & Commissioning:

30% at the time of starting of the Erection, 65% as per work progress, 5% after erection & commissioning

Delivery: Will be decided later,

Detailed Commercial Agreement with terms and conditions will be executed separately Kindly accept this order and do the needful

With thanks and regards

For Shivashakthi Sugars Limited

Authorised Signatory”

103. From the said letter of intent it is clear, they had two options and on the day they were placing the letter of intent, they had not made up their mind to install which machinery. The aforesaid letter of intent makes it clear, 10% is to be paid as advance alongwith the commercial agreement and the period for delivery is also to be decided as against the claiming delivery. They have also produced a commercial agreement which they purported to have been entered with M/s. Kay Bouvet Engineers Pvt. Limited, Pune. The said agreement do not contain the facing sheet showing that Shivashakti Sugars Ltd., have entered into a commercial agreement with M/s. Kay Bouvet Engineers Pvt. Limited, Pune. The said agreement starts with the definition Clause. The printed terms in the entire agreement, there is no mention of any advance paid. However, at Clause 2.15.1 under the head terms of payment, it is stated that 10% of the contract price shall be paid on signing of the contract document as advance of Rs. 2,05 Crores only. But there is no indication that such an amount was paid under the agreement. Though in the quarterly returns it was mentioned the date of the cheque is 14.05.2008, nothing is produced to show that such payment is made. No invoice is produced. The Bank statement showing the encashment of the cheque if it had been issued is not produced. In this context, certificate issued by the Chartered Accountant which is not in dispute assumes importance, which reads as under:

“CERTIFICATE

This is to certify that M/s. Shivshakti Sugars Ltd., having Registered Office at Mayor Chitramandir Road, At post Ankali, Belguam, and Plant at Yadrav, Soundatti, Taluka Raibag, Belgaum has already incurred the following expenditure towards the Project of 3500 TCD Sugar Plant and 14 MW Co-Generation upto 13.10.2010

1.Purchase of Land2,13,00,0002.The Expenses incurred towards civil work, plant & machinery and preliminary expenses (as per list enclosed)21,51,35,0893.The expenditure bills submitted Pending for Paymenta)Plant & Machinery2,70,07,065b)Iron & Steel2,56,80,228c)Cement15,77,599d)Pratibha Construction Civil Construction Bill1,56,00,000Total30,62,99,981

The above information is correct as per the Books of Accounts records of the Company proceeds to us.

For, M/s. P.G Ghali & Co.

Chartered Accountants

Place: Belgaum(C.A Prakash G. Ghali)

Date: 15.10.2010Partner

M. No.-013132”

104. Along with the certificate, a statement of account supporting the expenses is produced showing the total expenses incurred towards several work plant and machinery and preliminary expenses to the extent of 21,51,35,089/-. In the said statement of account, this payment of Rs. 2.05 crores being 10% of the purchase order, Rs. 2.05 crores is not reflected at all. On the contrary, the expenses were incurred from 07.06.2010 onwards only. It gives an indication, nothing has been spent for a period earlier to that point of time. It was pointed out, the said letter of intent did not satisfy the requirements of placement of the firm order for purchase of plant and machinery which is the requirement stipulated in Clause (b) Explanation (4).

105. In that connection, the judgment of the Apex Court in the case of Dresser Rand S.A v. Bindal Agro Chem. Ltd.,9 is relied upon, which reads as under:

“It is now well settled that a letter of intent merely indicates a party's intention to enter into a contract with the other party in future. A letter of intent is not intended to bind either party ultimately to enter into any contract. It is no doubt true that a letter of intent may be construed as a letter of acceptance if such intention is evident from its terms. It is not uncommon in contracts involving detailed procedure, in order to save time, to issue a letter of intent communicating the acceptance of the offer and asking the contractor to start the work with a stipulation that a detailed contract would be drawn up later. If such a letter is issued to the contractor, though it may be termed as a letter of intent it may amount to acceptance of the offer resulting in a concluded contract between the parties. But the question whether the letter of intent is merely an expression of an intention to place an order in future or whether is a final acceptance of the offer thereby leading to a contract, is a matter that has to be decided with reference to the terms of the letter.”

106. The Apex Court has held that the letter of intent merely indicates the parties intention to enter into a contract with the other party. The letter of intent is not intended to bind either party, ultimately to enter into any contract. Whether the letter of intent is merely an expression of an intention to place an order in future or whether is a final acceptance for the order, thereby to lead into a contract is a matter that is to be decided with reference to the terms of the letter. Therefore, the letter of intent placed in this case do not satisfy the requirement of placement of a firm order for purchase of plant and machinery for two reasons, Firstly, in the letter of intent, they have placed the order for two types of machineries; option given to purchase either of them. There is nothing on record to show that exercise of the option and place orders for purchase of either of those two options. Therefore, a firm order had to follow the letter of intent before the seller supplies the plant and machinery for which the order is placed.

107. Secondly, it is incumbent on the Shivashakti Sugars Ltd., to show the payment of requisite advance is stipulated at 10%. Therefore, atleast they should have paid the advance amount within the period of two years from the date of letter of intent which they have failed to establish, on the contrary, the certificate and the enclosure of the certificate issued by the Chartered Accountant shows, no such payment is made even after April, 2010. Whether nearly about 21 crores and odd had been paid which does not include payment of 10% towards purchase of plant and machinery.

108. Therefore, in the light of the aforesaid material we have no hesitation in holding that the Shivashakti Sugars Ltd., have not complied with the second requirement of the placement of firm order for purchase of plant and machinery for the factory as well as the payment of requisite advance.

COMMENCEMENT OF CIVIL WORK AND CONSTRUCTION OF BUILDING FOR THE FACTORY

The third requirement is regarding commencement of civil works and construction of building for the factory.

109. In that, quarterly progress filed as against the column commencement of civil works and construction of the building, they have stated as under:

Item Of WorkName and address of the ContractorEstimated costAdvance/final amount paid with Cheque/Draft no. And dateDate of commencementDate of completion/Remark(1)(2)(3)(4)(5)(6)(7)Basement For Factory buildingSri SABARI ConstructionsRs. 54.48 lakhsRs. 10 lakhs ch. No. 359715 dtd 30-03-2008 IDBI, Tirupur14-04-200831.12.2008

a)Item of work already commenced during the previous quarter land levelling

b)Items of work commenced during the Current quarter Earth work excavation10350 CFTc)Items of work commenced up to the End of the current quarter (a) + (b)38950 CFTd)Items of work already completed During the previous quarter28600 CFTe)Items of work already during the Current quarter10350 CFTf)Items of work already completed upto the End of the current quarter (d) + (e)38950 CFT

110. It discloses that they entrusted the construction of basement of factory building through M/s. Sabari Constructions at an estimated cost of Rs. 54.48 crores. They have also paid a sum of Rs. 10.00 lakhs as advance by cheque No. 3597150 dated 30.03.2008 drawn on IDBI. The said date mentioned as 30.03.2008 is a mistake and correct date is 30.06.2008 i.e, two years after the expiry of the dates on which IEM is filed. On the basis of it, civil construction work has not commenced within two years from the date of IEM. Even otherwise, in order to substantiate mat contention, they have produced an agreement entered into between Shivashakti Sugars Ltd., and M/s. Sabari Constructions on 03.04.2008, within two years from the date of filing of the DEM. A perusal of the agreement shows, the said agreement was entered into for the construction of the ancillary buildings, roads, drains, compound walls, fencing and all other connected civil works for their proposed sugar plant at Shivashakti Sugars Ltd., Saundatti, Raibagh Taluk, Belgaum District, Karnataka. It also recites that scope of the work shall be as indicated in the tender documents in general. The total estimated value of the work entrusted to the contractor is Rs. 21.09 lakhs only, excluding the material cost which will be purchased by the company directly. The company agreed for an advance of 10% of contract price towards mobilization of work force and materials against submission of Bank guarantee as per the firm to be engaged by the company till completion of works. The running bills of the two shall be once in a month for a value of Rs. 50.00 lakhs or 15% of the contract value whichever is high. The company shall pay 75% as advance against each running bill within 10 days of general scrutiny and the balance within 21 days after the final scrutiny. Time for the works to be completed is as per the schedule. The date of handing over the site to the contractors shall be taken as base date for time schedule. The completion period is 8 months. The actual schedule of completion of various other works keeping 1½ months to four months for completion of all machinery foundations shall be furnished to match machinery erection schedule at the time of signing the agreement Therefore, if the said contract had been given effect to and construction work had commenced in terms of the contract, 10% of the total amounts which reflect the cost of Rs. 21,09,000/- should have been paid and the construction should have been completed within 8 months and if the amount had been paid as against running bills, those particulars should have been produced.

111. The Certificate issued by the Chartered Accountant shows that a sum of Rs. 1,56,00,000/- is to be paid towards M/s. Prathibha civil construction bill. Therefore, it is obvious that the persons with whom they entered into an agreement and paid Rs. 10,00,000/- lakhs has not completed the construction of the building. As annexed to the Certificate issued by the Chartered Accountant there is no reference to any amount paid by M/s. Sree Sabary Constructions. That apart this aforesaid statement shows that the work done by M/s. Prathibha construction is nothing but land levelling, earth work excavation and digging up the soil as mentioned therein. But the requirement of Clause (c) of Explanation (iv) (e) is in respect of civil works and construction of building for the factory. Therefore, within two years period prescribed under law, the civil works did not commence much less the construction of the building for the factory was taken up. In this context it is necessary to see if really the said construction had been put up, what are the legal requirements which had to be satisfied before taking up of such construction activity.

112. The construction is sought to be made either in Saundatti or in Yadrav Village. Both the villages are governed by the provisions of the Karnataka Panchayath Raj Act, 1983. Chapter-IV of the said Act deals with definitions, duties and powers of Grama Panchayat Adhyaksha and Upadhyaksha. Section 64 of the said Act deals with the Regulation of the erection of the building which reads as under:—

“64. Regulation of the erection of buildings — (1) Subject to such rules as may be prescribed, no person shall erect any building or alter or add to any existing building or reconstruct any building without the written permission of the Grama Panchayath. The permission may be granted on payment of such fees as may be specified by bye-laws.

2) If the Grama Panchayath does not, within sixty days from the receipt of the application determine whether such permission should be given or not and communicate its decision to the applicant, such permission shall be deemed to have been given and the applicant may proceed to execute the work, but not so as to contravene any of the provisions of this Act or any rules or bye-laws made under this Act.

3) Whenever any building is erected, added to or re-constructed without such permission or in any manner contrary to the rules prescribed under sub-Section (1) or any conditions imposed by the permission granted, the Grama Panchayath may, whether any action is taken or not against such person under Section 298, —

(a) direct that the building, alteration or addition be stopped; or

(b) by written notice require within a reasonable period to be specified therein, such building, alteration or addition to be altered or demolished as it may deem necessary for the promotion of public health or the prevention of danger to life or property.

4) In the event of non-compliance with the terms of any notice under Clause (b) of sub-Section (3) within the period specified in the notice, it shall be lawful for the Grama Panchayath to take such action as may be necessary for the completion of the act thereby required to be done, and all the expenses therein incurred by the Grama Panchayath shall be paid by the person or persons upon whom the notice was served and shall be recoverable as if it were a tax imposed under Section 199.

5) An appeal shall lie to the (Executive Officer) from any order of direction or notice of the Grama Panchayath under sub-Section (1), (2) or (3) and his decision on such appeal shall be final.

6) Any appeal under sub-Section (5) pending before the Public Works and Amenities Committee of the Zilla Parishad shall on the date of commencement of the Karnataka Panchayath Raj Act, 1993 stand transferred to the Assistant Commissioner and such appeal shall be decided by him as if it had been filed before him.”

113. A perusal of the aforesaid provision makes it clear that no person shall erect any building without the written permission of the Grama Panchayath. The permission may be granted on payment of such fees as may be specified by law. Before a permission is granted by the Grama Panchayath the applicant should give an application. The said application has to be considered within 60 days from the receipt of the application. After the expiry of the said 60 days if no permission is granted the permission shall be deemed to have been given and the applicant may proceed to execute the work. Therefore the law contemplates a written application is to be filed by the applicant to the Grama Panchayath for grant of permission to erect any building in the village, the payment of fees as specified in the first bye-law and the written permission of the Grama Panchayath shall be obtained for undertaking the construction of the building. The legal requirement of such permission is not disputed by M/s. Shivashakthi Sugars Limited.

114. By virtue of the powers conferred by sub-Section (1) of Section 64 of the Karnataka Panchayath Raj Act (For short hereinafter referred to as “The Act”) read with Section 311 of the said Act, the Government of Karnataka has made the Karnataka Panchayath Raj (Grama Panchayath Control Over erection of buildings) Rules, 1994. Rule 3 deals with application to erect a building which reads as under:

Rule 3. Application to erect a building:—

(1) any person intending to erect a building shall, apply in writing to the Grama Panchayath for permission to erect the building and shall furnish, along with the application, —

(A) in case of erection of a new building, —

(i) a site plan, in duplicate, of the land on which he intends to erect the building, showing the position of the building to be erected in relation to the land:

Provided that, if the building to be erected is of less than five thousand rupees in value, it shall be sufficient if the site plan shows the size of the proposed building and its position in relation to the land.

(ii) the plan of the building to be erected such plan being in duplicate and showing:—

(a) the plan of the ground floor and of each other floor, if any, with Sections and elevations;

(b) the levels of the foundation with reference to the level of the centre of the adjacent roads or streets;

(c) depth and thickness of foundations;

(d) the dimensions and structure of roof:

Provided that if the building to be erected is of less than five thousand rupees in value it shall be sufficient to show levels at which the foundation of the lowest floor is proposed to be laid;

(B) in case of alteration or addition to any existing building or reconstruction of a building, a copy of the attested previous sanctioned plan:

Provided that if the applicant for any reasons sworn to in an affidavit, cannot produce the previous sanctioned plan of the existing building, then in such cases the plan of the existing Building alongwith site plan shall be furnished and it shall be examined in the light of the existing rules and bye-laws relating to erection of building.

(2) The Grama Panchayath may on receipt of an application under sub-rule (1), require the applicant in writing to furnish such other particulars as may be necessary in the circumstances of the case, and on such requisition, the applicant shall furnish such particulars unless there are reasonable grounds for not furnishing such particulars.

115. Rule 4 deals with ‘Calling for objections’, which reads as under:

“4. Calling for objections, etc.—(1) The Grama Panchayath may, on receipt of an application under Rule 3, give public notice by affixing such notice on the notice board of the office of the Grama Panchayath calling for objections thereto, within a period not exceeding seven days from the date of such notice, as may be specified therein.

(2) If any objections are received within the time specified regarding the proposed erection of the building the Grama Panchayath shall consider such objections before granting or refusing the permission.

116. Rule 5 deals with grant of permission subject to payment of requisite fees which reads as under:

Rule 5: Grant of permission: — If the Grama Panchayath is satisfied that the proposed erection of the building is in accordance with the provisions of these rules and the bye-laws made under the Act, it shall grant the permission applied for, subject to payment of the requisite fee.

117. Rule 6 deals with conditions to be imposed which are as under:

Rule 6: Conditions to be imposed:—

(1) Within the boundary of every site on which a building is to be erected, there shall be provided and maintained, a minimum margin of three feet of open space of the two sides and the rear and four feet in the front.

(2) Every building intended for human habitation shall be so erected that it has plinth height of not less than two feet from the ground level.

118. From the aforesaid rules, it is clear any person who intends to erect a building should comply with the following requirements:

(a) Application in writing for permission to erect a building.

(b) A site plan in duplicate showing the land where he intends to erect a building and also showing the possession of the building to be erected in relation to the land.

119. On receipt of such application, the Grama panchayath may give public notice by affixing such notices on the notice board giving 7 days period for such objections. If objections are filed, it has to be considered. However, if the Grama Panchayath is specified that the proposed erection of the building is in accordance with the provisions of the rules and the byelaws made under the Act, it shall grant permission prayed for subject to payment of the requisite fees. Therefore, the permission to erect a building shall be in writing, it shall granted on payment of requisite fees. In the instant case, admittedly, no application is filed for such permission. No site plan in duplicate is produced. No requisite fee is paid for such licences or sanctioning of the plan. No written permission permitting erection of the building is granted by the Village Panchayath.

120. Their contention is that they have taken such written permission both from Saundatti Village Panchayath as well as Hubbarwadi within which Yadrav village is situated. To substantiate the said contention they rely on two documents. The first document is dated 27-8-2008 which is styled as ‘No Objection Certificate’ issued by the Chairman of the Grama Panchayath, Saundatti. On the face of it, this no objection certificate has been issued after the expiry of two years period from the date of IEM. A reading of the said Certificate shows that M/s. Shivashakthi Sugars intend to construct a 3,000 PCD capacity sugar factory and 45 M. Watt co-generation building and a residential quarters in Sy. No. 178/1 and 177/3. For the other purpose they have applied to the Panchayath for No objection Certificate. After considering the said application they have stated that they have no objection whatsoever for such construction and accordingly they are issuing the document. Similarly, the Chairman of the Village Panchayath of Diggewadi the very same day that is on 27-8-2008 has issued a No Objection Certificate for the aforesaid constructions in Sy. No. 98/1, 92/2, 6/1, 6/2, 6.C, 6/4, 98/3b/2, 95/2, 95/3, 99/2A, 99/1b/1, 99/2b/1, 5/1, 7/1, 92/2 and they have no objection whatsoever. Therefore it is clear that what is granted by these two Panchayaths is No Objection Certificate. The Panchayath Raj Act did not contemplate any such No objection Certificate to be issued by a Grama Panchayath to enable a person to put up construction in a village. On the contrary what Section 64 requires is that the person intending to put up a construction has to make an application for grant of permission but he should pay such fees as may be prescribed and then a written permission for erection of any building is to be granted by the Grama Panchayath. Therefore, the said Certificate did not constitute permission granted by the Village Panchayath under Section 64 of the Act. In fact in reply to the information sought under the Right to Information Act, Saundatti Grama Panchayath on 14-3-2001 have replied that no permission is obtained by M/s. Shivashakthi Sugars Limited for establishment of factory under Section 64 and 66 of the Karnataka Panchayath Raj Act. Therefore it is clear that no permission was obtained under Section 64 of the Grama Panchayath Act for erecting a building. As stated earlier even the said no objection issued is beyond the period of two years.

121. Section 66 of the said Act deals with the permission for the construction of factories and the installation of machinery which reads as under:—

“66. Permission for the construction of factories and the installation of machinery — No person shall, without the permission of the Grama Panchayath and except in accordance with the condition specified in such permission—

“a) construct or establish any factory, workshop or workplace in which it is proposed to employ steam power, water power or other mechanical power or electrical power, or

b) install in any premises, any machinery or manufacturing plant driven by any power as aforesaid, not being machinery or manufacturing plant exempted by rules made by the Government under this Act.”

122. A reading of the aforesaid provision makes it clear that without the permission of the Grama Panchayath and except in accordance with the provisions specified in such permission no person can establish any factory in the Grama Panchayath. Therefore for construction of factories permission under Section 66 is a must and for construction of any other building, a permission under Section 64 is a must Without such permission no construction of factory building is permissible under the aforesaid two provisions.

123. The Learned Counsel appearing for M/s. Shiva Shakthi Sugar Mills contended that within two years period from the date of IEM they have taken effective steps for commencement of civil works and for construction of building for the factory, the legal obligation is cast upon them under the aforesaid statutory provisions to get permission of the Grama Panchayath for erection of building and for erection of factory premises. Admittedly no such permission is obtained. Even more than four years have elapsed to this date, the said effective steps are not taken. As the intended construction is to establish a factory apart from the permission under the provisions of the Karnataka Panchayath Raj Act, they are also required to obtain permission under the Factories Act, 1948. Section 6 of the Factories Act deals with approval, licensing and registration of factories which reads as under:—

“6. Approval, licensing and registration of factories:

1) The State Government may make rule—

1(a) requiring, for the purpose of this Act, the submission of plans of any class or description of factories to the Chief Inspector or the State Government;

(aa) requiring, the previous permission in writing of the State Government or the Chief Inspector to be obtained for the site on which the factory is to be situated and for the construction or extension of any factory or class or description of factories;

a) requiring for the purpose of considering applications for such permission the submission of plans and specifications;

b) prescribing the nature of such plans and specifications and by whom they shall be certified;

c) requiring the registration and licensing of factories or any class or description of factories, and prescribing the fees payable for such registration and licensing and for the renewal of licences;

d) requiring that no licence shall be granted or renewed unless the notice specified in Section 7 has been given.

2) If on an application for permission referred to in (Clause (aa)) of sub-Section (1) accompanied by the plans and specifications required by the rules made under Clause (b) of that sub-Section, sent to the State Government or Chief Inspector by registered post, no order is communicated to the applicant within three months from the date on which it is so sent, the permission applied for in the said application shall be deemed to have been granted.

3) Where a State Government or a Chief Inspector refuses to grant permission to the site, construction or extension of a factory or to the registration and licensing of a factory, the applicant may within thirty days of the date of such refusal appeal to the Central Government if the decision appealed from was of the State Government and to the State Government in any other case.”

124. The aforesaid provision requires the statement of plans of any class or description of factories to the Chief Inspector of the State Government and requires the previous permission in writing of the State Government or the Chief Inspector to be obtained for the site on which the factory is to be constituted and for the construction or extension of any factory or class or description of factories. It also requires for the purpose of considering the applications for such permission, the submission of plans and specifications prescribed the nature of such plans and specifications and by whom that shall be certified. Therefore before taking up any construction activity of a factory, plans have to be prepared. The said plans have to be submitted to the Chief Inspector of the State Government for consideration and only after a written permission is granted by the appropriate authority for establishment of the factory on the site on which the factory is to be situated then the applicant can proceed with the construction. Absolutely no material has been placed on record to show that any plans were prepared and submitted for consideration and the permission was obtained in writing under Section 7 of the Factories Act, 1948, when no construction of a factory premises could have been taken up by M/s. Shivashakthi industry. That apart, under the provisions of the Air (Prevention & Control) of Pollution Act, Section 21 provides for restrictions on use of certain industrial plans which reads as under:—

“21. Restrictions on use of certain industrial plants.—(1) Subject to the provisions of this section, no person shall, without the previous consent of the State Board, establish or operate any industrial plant in an air pollution control area:

Provided that a person operating any industrial plant in any air pollution control area immediately before the commencement of section 9 of the Air (Prevention and Control of Pollution) Amendment Act, 1987 (47 of 1987), for which no consent was necessary prior to such commencement, may continue to do so far a period of three months from such commencement or, if he has made an application for such consent within the said period of three months, till the disposal of such application.)

(2) An application for consent of the State Board under sub-Section (.1) shall be accompanied by such fees as may be prescribed and shall be made in the prescribed form and shall contain the particulars of the industrial plant and such other particulars as may be prescribed.

Provided that where any person, immediately before the declaration of any area as an air pollution control area, operates in such area any industrial plant, such person shall make the application under this sub-Section within such period (being not less than three months from the date of such declaration) as may be prescribed and where such person makes such application, he shall be deemed to be operating such person makes such application, he shall be deemed to be operating such industrial plant with the consent of the State Board until the consent applied for has been refused.

3) The state Board may make such inquiry as it may deem fit in respect of the application for consent referred to in sub-Section (1) and in making any such inquiry, shall follow such procedure as may be prescribed.

4) Within a period of four months after the receipt of the application for consent referred to in sub-Section (1), the State Board shall, by order in writing, and for reasons to be recorded in the order, grant the consent applied for subject to such conditions and for such period as may be specified in the order, or refuse such consent:)

Provided that it shall be open to the State Board to cancel such consent before the expiry of the period for which it is granted or refuse further consent after such expiry if the conditions subject to which such consent has been granted are not fulfilled:

Provided further that before cancelling a consent or refusing a further consent under the first proviso, a reasonable opportunity of being heard shall be given to the person concerned.

5) Every person to whom consent has been granted by the State Board under sub-Section (4), shall comply with the following conditions, namely:—

(i) the control equipment of such specifications as the State Board may approve in this behalf shall be installed and operated in the premises where the industry is carried on or proposed to be carried on;

(ii) the existing control equipment, if any, shall be altered or replaced in accordance with the directions of the State Board;

(iii) the control equipment referred to in Clause (I) or Clause (ii) shall be kept at all times in good running condition;

(iv) chimney; wherever necessary, of such specifications as the State Board may approve in this behalf shall be erected or re-erected in such premises;

(v) such other conditions as the State Board may specify in this behalf; and

(vi) the conditions referred to in Clauses (I), (ii) and (iv) shall be complied with within such period as the State Board may specify in this behalf:

Provided that in the case of a person operating any industrial plant in an air pollution control area immediately before the date of declaration of such area as an air pollution control area, the period so specified shall not be less than six months:

Provided further that —

a) after the installation of any control equipment in accordance with the specifications under Clause (I), or

b) after the alteration or replacement of any control equipment in accordance with the directions of the State Board under Clause (ii), or

c) after the erection or re-erection of any chimney under Clause (iv), no control equipment or chimney shall be altered or replaced or, as the case may be, erected or re-erected except with the previous approval of the State Board.

6) If due to any technological improvement or otherwise the State Board is of opinion that all or any of the conditions referred in to sub-Section (5) require or requires variation (including the change of any control equipment, either in whole or in part), the State Board shall, after giving the person to whom consent conditions and thereupon such person shall be bound to comply with the conditions as so varied.

7) Where a person to whom consent has been granted by the State Board under sub-Section (4) transfers his interest in the industry to any other person, such consent shall be deemed to have been granted to such other person and he shall be bound to comply with all the conditions subject to which it was granted as if the consent was granted to him originally.”

125. Similarly, Section 25 of the Water (Prevention and Control of Pollution)Act, 1974 provides for restrictions on new outlets and new discharges which reads as under:—

“Section 25. Restrictions on new outlets and new discharges — Subject to the provisions of this Section, no person shall, without the previous consent of the State Board —

a) establish or take any steps to establish any industry, operation or process, or any treatment and disposal system or any extension or addition thereto, which is likely to discharge sewage or trade effluent into a stream or well or sewer or on land (such discharge being hereafter in this Section referred to as discharge of sewage); or

b) bring into use any new or altered outlet for the discharge of sewage; or

c) begin to make any new discharge of sewage:

Provided that a person in the process of taking any steps to establish any industry, operation or process immediately before the commencement of the Water (Prevention and Control of Pollution) Amendment Act, 1988, for which no consent was necessary prior to such commencement, may continue to do so for a period of three months from such commencement or, if he has made an application for such consent, within the said period of three months, till the disposal of such application.

2) An application for consent of the State Board under sub-Section (1) shall be made in such form, contain such particulars and shall be accompanied by such fees as may be prescribed.

3) The State Board may make such inquiry as it may deem fit in respect of the application for consent referred to in sub-Section (1)and in making any such inquiry shall follow such procedure as may be prescribed.

4) The State Board may—

e) grant is consent referred to in sub-Section (1), subject to such conditions as it may impose, being —

i) in case referred to in Clauses (a) and (b) of sub-Section (1) of Section 25, conditions as to the point of discharge of sewage of as to the use of that outlet or any other outlet for discharge of sewage;

ii) in the case of a new discharge, conditions as to the nature and composition, temperature, volume or rate of discharge of the effluent from the land or premises from which the discharge or new discharge is to be made; and

iii) that the consent will be valid only for such period as may be specified in the order;

and any such conditions imposed shall be binding on any person establishing or taking any steps to establish any industry, operation or process, or treatment and disposal system of extension or addition thereto, or using the new or altered outlet, or discharging the effluent from the land of premises aforesaid; or

(b) refuse such consent for reasons to be recorded in writing.

(5) Where, without the consent of the State Board, any industry, operation or process, or any treatment and disposal system or any steps for such establishment have been taken or a new or altered outlet is brought into use for the discharge of sewage or a new discharge of sewage is made, the State Board may serve on the person who has established or taken steps to establish any industry, operation or process, or any treatment and disposal system or any extension or addition thereto, or using the outlet, or making the discharge, as the case may be, a notice imposing any such conditions as it might have imposed on an application for its consent in respect of such establishment, such outlet or discharge.

(6) Every State Board shall maintain a register containing particulars of the conditions imposed under this Section and so much of the register as relates to any outlet, or to any effluent, from any land or premises shall be open to inspection at all reasonable hours by any person interested in, or affected by such outlet, land or premises, as the case may be, or by any person authorised by him in this behalf and the conditions so contained in such register shall be conclusive proof that the consent was granted subject to such conditions.

7) The consent referred to in sub-Section (1) shall, unless given or refused earlier, be deemed to have been given unconditionally on the expiry of a period of four months of the making of an application in this behalf complete in all respects to the State Board.

8) For the purposes of this Section and Sections 27 and 30 —

(a) the expression “new or altered outlet” means any outlet which is wholly or partly constructed on or after the commencement of this Act or which (whether so constructed or not) is substantially altered after such commencement;

(b) the expression “new discharge” means a discharge which is not, as respects the nature and composition, temperature, volume, and rate of discharge of the effluent substantially a continuation of a discharge made within the preceding twelve months (whether by the same or a different outlet), so however that a discharge which is in other respects a continuation of previous discharge made as aforesaid shall not be deemed to be a new discharge by reason of any reduction of the temperature or volume or rate of discharge of the effluent as compared with the previous discharge.”

126. From the No Objection Certificate issued by the Karnataka State Pollution Control Board it is clear that under the aforesaid two provisions an application was submitted on 27-7-2008, which is clearly after two years period from the date of IEM. Thereafter, the Karnataka State Pollution Control Board has granted No Objection Certificate for setting-up a sugar industry with capacity of 3500 TCD and co-generation plan of 4.5 MW at Sy. Nos. 5/1, 6/1, 7/1, 92/1B/2, 92/2A, 95/2 & 3, 98/1/3B/2, 99/1A, 991B/1, 99/2A, 99/2B1, 177/3, 178/1 of Saundatti Village, Raibagh Taluk, Belgaum District. As stated earlier except Sy. No. 177/3 and 178/1 which is situated in Saundatti Village, all other Survey Numbers are situated in Yadrav village. Therefore, not only there is a mis-representation on the part of M/s. Shivashakthi Sugars in respect of the aforesaid Survey Numbers, the authority without properly appreciating and without application of mind has mechanically granted No Objection Certificate to set up sugar factory in the aforesaid Survey Numbers. Realising that the said Survey Numbers did not depict the true state of affairs an attempt was made to cover up the laches by filing in the Court a inspection report of the Senior Environmental Officer. The said inspection report shows that except Survey Numbers 171/3, 178/1, the rest of the Survey Numbers are situated in Yadrav Village. The location details given in the said inspection report shows the proposed site is located adjacent to Ankali to Raibag MDR on the North side direction. The village Yadrav is located at South-East direction which is at a distance of 1.5 Kilometers away from the proposed site. Raibag town is located at South-East direction at a distance of about 8 kilometers away from the proposed site. The Nasalapur village is located at North-West direction at a distance of about 4 Kilometers away from the proposed site. Ankali village is located at North-West direction, that is about 6 kilometers away from the proposed site. There are no settlements/dwellings at a distance about 1.5 Kilometers away from the proposed site.

127. This document also clearly demonstrates that no construction of building for the factory and the civil works commenced within two years from the date of IEM. If as they contend they have put up constructions as evidenced by the photographs produced, the constructions are put up without a written permission under Section 64 of the Panchayath Raj Act, without prior permission under Section 66 of the Panchayath Raj Act and without a written permission under Section 7 of the Factories Act Therefore, all those constructions are illegal, contrary to law and those constructions are put up after the expiry of two years period from the date of IEM which do not assist M/s. Shivashakthi Sugars from showing that effective steps have been taken within two years period. In fact at this juncture, it is relevant to notice M/s. Shivashakthi Sugars Ltd., in their letter dated 27-1-2010 have stated that they have taken some effective steps, wherein they have stated as under:—

1) The purchase of 77.03 acres of land and its conversion is under process.

2) The machinery purchase orders finalisation is under process.

3) They have already spent considerable amount for the project.

4) Obtained orders from the Irrigation Department to lift 50 lakh Litres of water from river Krishna.

5) Obtained clearance from Karnataka State Pollution Control Board.

6) Entry tax exemption is under process.

7) Central Excise Certificate and Certificates under Commercial Taxes have been obtained.

128. Therefore it is clear that even as on 9-3-2010 the conversion of agricultural land for industrial purpose was under process. The machinery purchase orders had not yet been finalised. There is no mention about any Civil work or construction of the factory building.

129. Therefore it is clear from the aforesaid admission that even as on 9-3-2010 effective steps as contemplated had not been taken by M/s. Shivashakthi Sugars. The contention that they had taken effective steps such as commencement of civil works for construction of the building for the factory is not substantiated.

SANCTION OF REQUISITE TERM LOANS FROM BANKS OR FINANCIAL INSTITUTIONS

130. In order to show the compliance of this effective steps the following documents are relied on:—

Name of The Banks/Financial InstitutionsDate of submission of application to Banks/financial Institutions for Term loansAmount applied forAmount sanctionedLetter No. and date of sanction letterAmount disbursedRemark(1)(2)(3)(4)(5)(6)(7)IOB19.12.2007Rs. 61crsRs 61 Crs29.01.2008Rs. 0.22 crsBOIRs. 75crsRs. 75 Crs19.05.2008NIL

131. To substantiate the contention of the said statement, they have produced a letter from Bank of India dated 19.5.2008 addressed to M/s Shivasakthi Sugars Limited on the subject or request for sanction of credit facilities. There is no indication that the said credit facility is sanctioned for the establishment of a sugar factory at Saundatti village. In fact the letter is addressed to Shivashakti Sugars Limited No. 5, AKS Nagar, T. Road, Coimbatore-641001.

132. Similarly, yet another document on which reliance is placed is a letter from Indian Overseas Bank, RS. Puram Branch, Coimbatore to Shivashakti Sugars Limited 624, II main Road, HAL II Stage, Indiranagar, Bangalore — 38. Here also in the entire letter there is no reference to any sugar factory to be set-up at Saundatti village. However, in the column where nature of facility is to be mentioned, it is stated that the term loan is towards part financing for setting-up a new sugar mill of 5000 TCD capacity ethanol plant of 60 KLPD and 24 mega watt co-generation power plant at a total cost of Rs. 308.37 crores. Total debt Component is 200 crores. A short term loan towards soft loan to be received from Sugar Development Fund Loan of Rs. 45 crores. Having regard to the specification mentioned in the other documents at Saundatti, Shivashakthi Sugars is not setting up a mill of 5000 TCD capacity, ethanol plant of 60 KLPD. The capacity of the sugar plant to be set-up at Saundatti Village is only 3000 TCD and 30 KLPD is the capacity of Ethanol plant and 12 mega watt is the capacity of co-generation power plant whereas what is mentioned is 24 mega watt. Therefore, it is clear the said loan document do not pertain to the Sugar Factory to be established at Saundatti Village. The auditor who has endorsed the expenses for the period from 1.4.2010 to 14.10.2010 do not indicate that any amount has been drawn from these two Banks. On the contrary, the said statement of account refers to only Federal Bank as well as Dr. Prabhakar Kore, M/s SSL and all those entries are from 7.10.2006 to 11.10.2010 i.e, much after the expiry of the two years period. Therefore, it is clear even the 4 requirement as contemplates under explanation IV is not complied with by the Shivashakthi Sugars.

133. Explanation I to Section 6(A) makes it very clear an existing factory shall also include a sugar factory that has taken all effective steps as specified in Explanation IV to set-up a sugar factory. Therefore, explanation 4 has to be read conjunctively and not distinctively. If, only all the effective steps stipulated in explanation IV is taken, then it could be said it is an existing sugar factory and it continues to be a new sugar factory only as defined under Explanation II.

134. In the light of the aforesaid undisputed material on record, it is clear that Shivashakthi Sugar Limited had not taken effective steps within two years from the date of filing of the IEM.

WHAT IS THE EFFECT OF NOT TAKING EFFECTIVE STEPS WITHIN THE PRESCRIBED PERIOD?

135. Dealing with the effective steps, the Apex Court in the case of Ojas Industries Private Limited (Supra), it is held at Paras 27, 31 and 32 as under:—

“27… … 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…

31. 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.

32. 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.”

136. Therefore, the object behind stipulating the effective steps by way of a statutory provision cannot be lost sight off. Though even prior to the amendment, such effective steps were contemplated as it was held to be discretionary, the Government provided the statutory provisions making it retrospective as it was only clarificatory in nature. The effect of taking effective steps is if the first IEM holder or 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 project successfully then the remaining IEM holder for that area shall become non-est, they shall, however, remain in suspense from the stipulated period when the first IEM holder takes effective steps for implementing this IEM. If the earlier IEM holder do not take effective steps within the period stipulated under those statutory provisions, the legal effect is the IEM filed by a subsequent IEM holder comes to life, it becomes active and the earlier IEM holder stand de-recognized. Yet another consequences flowing from non-implementation of the IEM within the stipulated time is provided in Explanation 1 and 2 to Clause 6A. If after filing the IEM and has submitted a performance guarantee of Rs. 1 crore for implementation of the IEM, then it is called as a new Sugar Factory. Once the said new Sugar Factory takes all effective steps as specified in Explanation 4, then it becomes an existing Sugar Factory as-defined in Explanation 1. If after filing the IEM, furnishing the Bank guarantee, if no effective steps were taken, then such a factory will be considered as a new Sugar Factory and not as an existing Sugar Factory and the persons who have filed IEM can proceed to implement their IEM. Therefore, taking all effective steps, is a very important concept, which is now introduced by way of a statutory provision so as to protect the entrepreneurs in so far as setting-up of a Sugar Factory is concerned especially after de-licencing of Sugar Factories. It is in this context Clause 6C assumes importance which reads as under:—

“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 the Sugarcane (Control) Order are concerned and the performance guarantee shall be forfeited:

Provided that 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.”

137. Therefore, the stipulated time for taking effective steps shall be two years, failing which, the IEM shall stand de-recognized so as far as provisions of this Order are concerned and the Bank guarantee shall be forfeited. The legal effect of such not taking effective steps is clearly set-out in the said clause i.e by operation of law IEM shall stand derecognized. The word used is “shall”. Therefore, it is automatic. No further act is required to derecognize an IEM filed.

138. If the proviso to Clause 6E is to be interpreted as the provision for extension of time for taking effective steps, the appropriate authority on the recommendation of the State Government concerned has been vested with the power to give extension of one year and not exceeding 6 months for implementing the IEM. Therefore, maximum time is one year and the said extension should be for a period of 6 months at a time. In the nature of things, if an entrepreneur could not take effective steps within the stipulated time and if he is entitled to extension of time, the said extension of time can be granted only on the recommendation of the State Government concerned. Therefore, the said recommendation by the State Government and the extension of time should be before the said IEM stands derecognized. There is no provision for retrospective extension of time provided under those statutory provisions. In other words, before an IEM stands de-recognized by operation of law, the person who had filed an IEM, if he wants extension of time, he should take such steps requesting the appropriate authority for extension of time and the Government which is empowered to make a recommendation should make a recommendation before the said period of two years. It is only then the authority vested with the power to extend the time could exercise the power provided under the statute and extend the period stipulated for taking effective steps in accordance with law. Therefore, it is clear as effective steps were not taken within the period of two years from the date of filing of IEM and no extension was granted within a period of one year from the date of expiry of two years period the IEM stood de-recognized.

WHETHER VALIDITY OF ORDERS PASSED GRANTING EXTENSION?

139. We have to see whether the recommendation of the State Government for extension of IEM, extension of time for implementing the IEM and the order passed by the Central Government extending the period for taking steps are in accordance with law.

140. The IEM was filed on 08.06.2006 Two years period for taking effective steps is to be computed from that day which expires on 08.06.2008 As we have already set-out no effective steps as stipulated in Explanation 4 was taken by M/s. Shivashakti Sugars Limited before 08.06.2008, it is not their case that they did make any request to the Central Government for extension of time before the expiry of 08.06.2008 The only event which has happened between 08.06.2006 and 08.06.2008 is the order passed by the State Government allotting 21 villages to M/s. Shivashakti Sugars by their order dated 04.08.2007 The one year period from 08.06.2008 expires on 08.06.2009 We have on record that the Chief Director (Sugar) before the expiry of the period of 2 years i.e 08.06.2008, passed an order dated 15 April 2008 acknowledging the IEM filed by M/s. Shivashakti Sugars Limited and also the performance guarantee dated 10 May 2007 furnished by them and also a Distance Certificate dated 17 August 2007 from Commissioner for Cane Development. It was made clear that the Sugar Factory of M/s. Shivashakti Sugars Limited at Saundatti Village is taken on record as a ‘New Sugar Factory’ as provided in Explanation 2 to Clause 6A of the Sugarcane (Control) (Amendment) Order, 2006. They made it very clear that as per Clause 6C and D of the Amendment Order, 2006, the time limit for taking effective steps would be 2 years and the commercial production should commence within 4 years with effect from the date of filing of IEM with the Central Government failing which, the said performance guarantee shall be forfeited. Further M/s. Shivashakti Sugars Limited was required to furnish the progress report of the effective steps taken by them with regard to the implementation of aforesaid IEM to the Department on quarterly basis in the prescribed proforma.

141. From the aforesaid letter, it is clear that as on 15 April 2008, the Central Government was treating the Sugar Factory as a ‘New Sugar Factory’ and not as an existing Sugar Factory as no effective steps had been taken in pursuance of the IEM filed and therefore, they reminded the M/s. Shivashakti Sugars Limited to take effective steps within 2 years from the date of filing of IEM and to send a progress report of the effective steps taken. From the material on record, we do not find any reply that has been sent to this communication. M/s. Shivashakti Sugars Limited also did not furnish the steps taken by them with regard to the implementation of the aforesaid IEM to the department on quarterly basis in the prescribed proforma.

142. The Government of Karnataka on 05.03.2010 addressed a letter to the Secretary to Government, Commerce & Industries Department, Vikasa Soudha, Bangalore as under:—

“GOVERNMENT OF KARNATAKA

(Commissioner for Cane Development and Director of Sugar)

No. DSK/DEV/57/2006-07Office of the

Commissioner for Cane

Development and

Director of Sugar, Bangalore.

The Secretary to Government,

Commerce & Industries Department,

Vikasa Soudha, Bangalore.

Date: 5/3/2010

Sub: Shivashakti Sugars Ltd.—New Sugar unit at Saudatti Village of Raibag Taluk, Belgaum District—

Ref. 1. Letter dated 27.1.2010 of M/s. Shivashakti Sugars Limited

2. IEM No. 3080.SIA/IMO/2006 dated 8.6.2006

3. No. CI/245.SGF/06 dated 23.6.2007

4. No. CI/245.SGF/06 dated 4.8.2007

M/s. Shivashakti Sugars Ltd., a new sugar unit at Saudatti Village of Raibag Taluk, Belgaum District vide reference (1) above have requested for extension of time for one year from 8.6.2010 for implementing the IEM. They have obtained IEM on 8.6.2006 vide reference (2) above. As per the Sugarcane (Control) Amendment Order, 2006, Clause 6-A, Explanation-4, the following effective steps should be taken by the concerned persons to implement the IEM 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 loan from Banks or financial institutions.

e) Any other steps prescribed by the Central Govt. in this regard through a Notification.

Clause 6-C reads as follows:

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 of IEM with the Central Govt. failing which the IEM shall stand de-recognized as far as provisions of the Sugarcane (Control) Order are concerned and the performance guarantee shall be forfeited:

Provided that 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.”

M/s. Shivashakti Sugars Ltd., have taken some effective steps mentioned in para above. They have obtained IEM on 8.6.2006 As per the proviso to the clause 6-C, the State Govt. can give extension of one year not exceeding six months at a time, for implementing the IEM and commencement of commercial production thereof.

Govt. of Karnataka has already given in principle approval and cane area for this unit vide order cited at reference (3) and (4) above respectively.

M/s. Shivashakti Sugars Ltd. has already taken some effective steps like purchase of land, placement of order for plant and machinery etc. Therefore, I request you to kindly recommend the case of M/s. Shivashakti Sugars Ltd., Saudatti Village, Raibag Taluk, Belgaum District to Govt. of India for extension of time by six months from 8.6.2010 for implementing the IEM and commence of commercial production thereof. M/s. Shivashakti Sugars has to commence commercial production before 8.12.2010, positively of 6 months extension is given by Govt. of India.

Copy of the letter received from the factory is enclosed.

Yours faithfully,

Commissioner for cane

Development and Director of Sugar.

Copy to M/s. Shivashakti Sugars Ltd., #624, 11 Main, HAL 2 Stage, Indiranagar, Bangalore-38.

Commissioner for cane Development

and Director of Sugar.”

143. On 09.03.2010, the Secretary, Commerce and Industries Department, Government of Karnataka addressed a letter to the Chief Director (Sugar), Government of India, which reads as under:—

“GOVERNMENT OF KARNATAKA

CI: 41 SGF 2010Karnataka Government Secretariat,

Vikasa Soudha,

Bangalore, dated 09.03.2010

The Secretary,

Commerce and Industries Department,

Government of Karnataka,

Bangalore — 01.

The Chief Director, (Sugar),

Government of India,

Ministry of Consumer Affairs

Food and Public Distribution,

Dept. of Food & Public Distribution,

Director of Sugar,

Krishi Bhavan, New Delhi — 01.

Dear Sir,

Sub: M/s. Shivashakti Sugars Ltd., — New Sugar Unit at Saudatti Village of Raibagh — Taluk, Belgaum District — recommendtion for extension of IEM for six months regarding.

Ref (1) IEM No. 3080.SIA/IMO/2006 dated 08.06.2006

(2) Letter addressed to Government of India by Shivashakti Sugars Ltd. dated 27.01.2010

********

M/s. Shivashakti Sugars Ltd., have obtained IEM on 08.06.2006 vide reference (1) above for establishment of a new sugar unit at Saudatti village of Raibagh Taluk, Belgaum District Now M/s. Shivashakti Sugars Ltd requested to recommend Govt. of India for extension of time for 6 months for implementing the IEM and commencement of commercial production. Copy of the request letter dated 27.01.2010 of M/s. Shivashakti Sugars Ltd., is enclosed herewith for reference.

As per the Sugar Cane (Control) Amendment Order 2006 dated 10.11.2006, Clause 6-C reads as follows:

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 of IEM with the Central Govt. failing which the IEM shall stand de-recognized as far as provisions of the Sugarcane (Control)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.

M/s. Shivashakti Sugars Ltd., in their letter stated that they have taken some effective steps like 1) Purchase of 77.03 acres of land and its conversion is under process 2) Machinery Purchase orders finalization is under process. 3) They have already spent considerable amount for the project. 4) Obtained orders from Irrigation Department to lift 50 lakhs liters of water from the river Krishna 5) obtained clearance from Karnataka State Pollution Control Board 6) Entry Tax exemption is under process 7) Central Excise Certificate

And Certificates under Commercial Taxes have been obtained.

The Stipulated time for commencement of commercial production expires on 07.06.2010 As per proviso to the Clause 6-C, the Central Govt. can give extension of one year not exceeding six months at a time, for implementing the IEM and commencement of commercial production thereof. Hence requested for extension of time for 6 months.

From the above facts, M/s. Shivashakti Sugars Ltd., has already taken some effective steps. Therefore Govt. of Karnataka recommends the case of M/s. Shivashakti Sugars Ltd., Saudatti Village, Raibagh Taluk, Belgaum district for taking suitable decision for giving extension of 6 months for implementing the IEM and commencement of commercial production.

Yours faithfully,

(B.D Obappa)

Deputy Secretary, (Seri. & Sugar),

Commerce and Industries Department.

144. However, the Government of India, Ministry of Consumer Affairs, Food and PD, Department of Food and PD, Directorate of Sugar issued a show cause notice dated 27 April 2010, after referring to Explanations 1, 2, 3 and 4 to Clause 6A, the judgment of the Apex Court in the case of Ojas Industries (P) Ltd. v. Oudh Sugar Mills Ltd. (Supra) and other provisions of the amended rule and also referred to their earlier order dated 15.04.2008 The Paras 9, 10, 11, 12, 13 and 14, which reads as under:—

“9. Whereas, as per Clause 6D of the Sugarcane (Control) (Amendment) Order, 2006, as indicated in para 5 above, if an IEM 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.

10. Whereas, M/s. SSL did not submit any request for grant of extension in the validity period of IEM for implementing the IEM and commencement of commercial production within two years time limit for taking effective steps from the date of filing the IEM with the Central Government.

11. Whereas, Government of Karnataka vide letter No. CI 41 SGF 2010 dated 09.03.2010 recommended the case of M/s. SSL for grant of extension of six months for implementing the IEM and commencement of commercial production when the time limit to grant extension of time is already over.

12. Whereas, Government of Karnataka in the aforesaid letter, have reported that M/s. SSL have taken following effective steps:—

(i) Purchase of 77.03 acres of land and its conversion is under process;

(ii) Machinery purchase orders finalization is under process;

(iii) They have already spent considerable for the project;

(iv) Obtained orders from Irrigation Department to lift 50 lakh liters of water from the river Krishna;

(v) Obtained clearance from Karnataka State Pollution Control Board.

13. Whereas, M/s. SSL as per Clause 6C of the Sugarcane (Control) (Amendment) Order, 2006 failed to take effective steps as enumerated in Explanation 4 below Clause 6A of Sugarcane (Control) (Amendment) Order, 2006 within the stipulated time limit of two years from the date of acknowledgement of IEM

14. Now, therefore, I, Kalyan Nag, Director (Cost), Department of Food & Public Distribution, Directorate of Sugar, Krishi Bhavan, New Delhi hereby call upon to Show-Cause why M/s. SSL did not take effective steps within the stipulated time limit and why their Bank guarantee No. 3/07 dated 10.5.2007 of rupees one crore submitted in reference to IEM No. 3080.SIA/IMO/2006 dated 08.06.2006 acknowledged for setting-up of a new sugar factory at Saudatti Village, Raibag Taluk, Belgaum District, Karnataka should not be forfeited in terms of Clause 6D of Sugarcane (Control) (Amendment) Order, 2006,”

145. A perusal of the aforesaid letter makes it clear that M/s. Shivashakti Sugars Limited did not submit any request for grant of extension of time in the validity period of IEM for implementing the IEM and commencement of commercial production within 2 years time limit with the Central Government. Further at Para 11, it is categorically stated that the Government of Karnataka by the letter dated 09.03.2010 recommended for extension for 6 months for implementing IEM and commencement of commercial production when the time limit to grant extension of time is already over. They have referred to what the Government of Karnataka stated in the report and thereafter, it was held that M/s. Shivashakti Sugars Limited has failed to take effective steps as enumerated in Explanation 4 to Clause 6A within the stipulated time limit of 2 years from the date of acknowledgment of IEM. Therefore, as no effective steps were taken for implementation of IEM within 2 years from the date of filing of an IEM and a recommendation made by the Government of Karnataka was beyond the time limit to grant extension of time and the factors mentioned in the recommendation of the Government do not constitute a sufficient reason for extending the time, if at all, the Central Government was clear of the view that IEM stood de-recognized. However, Clause 6B2 provides for an opportunity being given to the entrepreneur before forfeiting the performance guarantee amount of Rs. 1 crore. The said notice was issued to show cause as to why Rs. 1 crore furnished as performance guarantee should not be forfeited. In fact, the Bank guarantee which was furnished by the M/s. Shivashakti Sugars Limited expired on 09.11.2009 and it was not extended at all. The next guarantee, they have furnished is dated 14.10.2010 which is in force. Therefore, on the day when the show cause notice issued calling upon them to show cause as to why Bank guarantee should not be forfeited, there was no valid Bank guarantee at all so that the authorities to encash the same and forfeit the amount. In reply to the said show cause notice, the M/s. Shivashakti Sugars Limited sent their reply dated 06.05.2010, which reads as under:—

“Date: 06.05.2010

The Director (Cost),

Government of India,

Ministry of Consumer Affairs,

Department of Food and Civil Supply,

Krishi Bhawan, New Delhi.

Sub: Reply to show cause notice dt. 27.4.2010 in the case of M/s. Shivashakti Sugars Ltd., Saudatti Village. Taluk Raibag. Karnataka —

With reference to your above show cause notice regarding setting of sugar factory by M/s. Shivashakti Sugars Ltd., Saudatti Village, Taluk Raibag, Belgaum District, Karnataka state, we would like to respectfully submit as under:—

1. We have taken all effective steps for implementation of IEM within a stipulated time of 2 years and submitted the same to Commissioner of Cane Development & Director of Sugar, Govt. of Karnataka vide our letter dt. 30.7.2009 (copy enclosed) along with enclosures.

2. On satisfactory compliance of timely effective steps taken by the Sugar Mill, Commissioner has recommended our proposal for extension of time limit for implementation of IEM to the Secretary, Commerce and Industries Department, Govt. of Karnataka.

3. The Secretary, Commerce and Industry Department, Govt. of Karnataka favourably recommended our proposal to the Chief Director of Sugar, Govt. of India, Ministry of Consumer Affairs, Food & Public Distribution, Director of Sugar Krishi Bhavan vide letter dt. 9.3.2010

4. M/s. Shivashakti Sugars Ltd. taken following steps within a period of two years.

i) We have purchased 73.29 acres of land and all those lands registered in the name of Shivashakti Sugars Ltd on dated. 15.2.2003 & 30.11.2007 list of land enclosed.

ii) After receipt of IEM we approached Govt. of Karnataka which had in its 8 State High Level Clearance Committee Meeting held on 23.2.2007 granted its approval vide its order No. C-1/176 SPL 2007 dt. 7.11.2007 (copy enclosed)

iii) Based on the above said order we have already approached various Govt. Authorities and taken further steps.

iv) Karnataka Govt. already allowed 20 villages to Shivashakti Sugar Ltd. vide letter dt. 4.8.2007 (copy enclosed)

v) Our petition HESCOM Hubli for power is under active consideration.

vi) Obtained orders from irrigation Deptt. To lift 50 lakhs liters of water from River of Krishna.

vii) We have placed order for purchase of machinery with M/s. Kay Bouvet Ltd. dt. 14.5.2008 and remitted advance (copy enclosed).

viii) Term Loan facility is made available by Indian Overseas Bank dt. 19.2.2007 (copy enclosed).

ix) Obtained order from Highway Department to lay pipes to Cannel water to the Mill site.

x) Obtained Karnataka State Pollution Control Board Consent.

xi) Our application for Entry Tax Exemption is under process with the state Govt.

xii) Central Excise Certificate and Certificate under Commercial Taxes have been obtained.

xiii) We have already spent considerable amount towards the project.

xiv) Quarterly Progress Report ending Sept 2008 is submitted to your office vide letter dt. 1.10.2008 giving all the details of effective steps taken by us within a period of two years. (copy enclosed).

In view of the above we would like to say that all effective steps for implementation of IEM have already taken by M/s. Shivashakti Sugars Ltd. within stipulated limit of 2 years.

We therefore earnest request your honour to consider our plea and grant us extension of time limit for implementation of IEM for a period of one year and obliged.

Thanking you,

Yours faithfully,

Shivashakti Sugars Ltd.”

146. In the reply after setting-out what they have done after filing of IEM, they requested for extension of time for implementation of IEM for a period of one year. In the said reply, it was categorically asserted that they have purchased 73.29 acres of land and the same are registered in the name of M/s. Shivashakti Sugars Limited and they have stated that copies are enclosed. As stated earlier except the sale deeds, which they have produced before the Court, the rest of the sale deeds are yet to see the light of the day. They also stated that they have placed orders for purchase of machinery with M/s. Kay Bouvet Ltd. dated 14.05.2008 and remitted advance and they have stated that copies are enclosed. What is enclosed is only the letter of intent to which already we have recorded a finding in detail. So even as on 06.05.2010 apart from these 2 documents, there was no documents such as a copy of the invoice and payment particulars showing placement of a firm order for purchase of machinery. They have also referred to the term loan facility made available by Indian Overseas Bank dated 19.02.2007 and with regard to the same, we have already referred to above. It is interesting to note now that they do not refer to the facility availed from the Bank of India on which reliance was placed in the quarterly report. In the entire reply sent, there is no reference to any civil work, there is no reference to any licence sanctioned or obtained from the Village Panchayat for establishment of the factory building. There is no reference to any order of conversion passed by the Deputy Commissioner permitting them to change of land uses from agricultural to industrial or non-agricultural. When the said reply was received by the Director of Sugar, he was not satisfied with the reply. Therefore, he sent a communication dated 21 May 2010, which reads as under:—

“File No. 25(1985) 2010-ST/141

Government of India

Ministry of Consumer Affairs, Food and PD,

Department of Food and PD,

Directorate of Sugar

Krishi Bhavan, New Delhi,

Dated 21 May 2010.

M/s. Shivashakti Sugars Limited,

624, II Main, HAL 2 Stage,

Indira Nagar, Bangalore-560038.

Sub: Setting up of sugar factory at Saudatti Village, Raibag Taluka, Belgaum District, Karnataka — reg.

I am directed to refer to your letter dated 06.05.2010 forwarding therewith reply to the Show Cause notice dated 27.04.2010 on the above mentioned subject and to advise you to furnish the effective steps taken by you upto 07.06.2008 (within two years from the date of acknowledgement of IEM dated 08.06.2006) in the prescribed proforma which was enclosed with this Directorate's Order dated 15.04.2008 (copy again enclosed for ready reference) with regard to implementation of the aforesaid IEM to examine the matter further. The requisite information may be furnished within 15 days of issue of the letter failing which further necessary action shall be taken as per law.

Yours faithfully,

(Kalyan Nag)

Director (Cost)

Ph. 011-2338-3433

End: As Above”

147. In reply thereto, they furnished the information in the prescribed proforma showing the details of the effective steps taken upto 07.06.2008 with regard to the implementation of IEM and they sought for extension of time for 6 months for commercial production. The quarterly report, which is already extracted above, does not show that any effective steps were taken within two years. Again the Director of Sugar was not satisfied with the explanation offered. Therefore, by their communication dated 17 June 2010, they called upon the Shivashakti Sugars to furnish the documents. The said letter reads as under:—

“File No. 25(2052) 2007-ST/184

Government of India

Ministry of Consumer Affairs, Food and PD,

Department of Food and PD,

Directorate of Sugar

Krishi Bhavan, New Delhi,

Dated 17 June 2010.

M/s. Shivashakti Sugars Limited,

624, 11 Main, HAL 2 Stage,

Indira Nagar, Bangalore-560038.

Sub: Setting-up of sugar factory by M/s. Shivashakti Sugars Ltd. at Saudatti Village, Raibag Taluka, Belgaum District, Karnataka — Amendment of Show-Cause notice — reg.

I am to refer to your letter dated Nil on the above mentioned subject and to advise you to furnish following documents:—

(i) Purchase of required land in the name of the factory:—

Photocopies of documents relating to purchase of land in the name of the Company with English or Hindi version.

(ii) 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 supplier:—

(a) Photocopy of the agreement with the machinery supplier;

(b) Details of DD/Cheques (No. & date) paid or LC opened in favour of concerned supplier as an advance; and

(c) Photocopy of the letter placing order with M/s. Kay Bouvet Engineering (P) Ltd along with cheque No. and date

(iii) Commencement of Civil Work and construction of building for the factory:—

(a) Photocopies of the agreement with Architect/Contractor(s);

(b) Details of DD/Cheques (No. and date) paid to above Architect/Contractor as an advance.

2. The requisite documents as stated above may be furnished within 15 days of issue of this letter failing which further action shall be taken as per law.

Yours faithfully,

(Kalyan Nag)

Director (Cost)

Ph. 011-2338-3433”

148. In reply there to, the Shivashakti Sugars furnished the documents. A copy of the said letter dated 21.06.2010 reads as under:—

“SHIVASHAKTI SUGARS LIMITED

Mayoor Chitra Mandir Road, At Post Ankali, Raibag Taluk,

Dist: Belgaum.

Date: 21.06.2010

The Chief Director (Sugar)

Govt. of India

Ministry of Consumer Affairs, Food & PD

Directorate of Sugar,

Krishi Bhavan, New Delhi.

Sub: Setting-up of Sugar Factory M/s. Shivashakti Sugars Ltd. at Saudatti Village, Raibag Taluk, Dist: Belgaum

With reference to your amended show cause notice dated 17.6.2010, we are furnishing herewith the following for your kind consideration.

(1)Purchase of Land:Enclosed the details of the Lands purchase along with zerox copies of purchase deeds of land in the nature of the Company (End. Page No. from 1 to 7 (in English)(2)Placement of Firm order for Plant & Machinery:(a)Photo copy of AgreementThe copy of Minutes of Meeting with suppliers M/s Kay Bouvet Engineering (P) Ltd. for amendment of Agreement duly acknowledged enclosed.(b)Details of DD/Cheque paid in advanceAdvance paid to M/s Key Bouvet Engineering (P) Ltd by Cheque No. 68908 dated 15.5.2008 drawn on Bank of India.(c)Copy of Letter Placing OrderThe copy of letter placing the order for Boiling House to M/s Key Bouvet Engineering (P) Ltd.

3.Commencement of Civil Work(a)Photo copy of AgreementZerox copy of Agreement with M/s. Shree Sabari Constructions Coimbatore dated 3rd April 2008.(b)Details of DD/Cheque paid as advanceCh. No. 359715 dated 30.06.2008 drawn on IDBI Bank Tirupur Branch of Rs. 10,00,000/-

We hope that the above information is in order and kindly do the needful to grant us the extension of IEM as requested at your earliest & oblige.

Thanking you,Yours faithfully,

(Shri. S.D Gurav)

Chief Executive Officer”

149. In so far as purchase of land is concerned, it is stated that they have purchased 77.17 acres of land. Therefore, it obvious that if at all purchased, they should have produced before this Court. They have produced the sale deeds what they are having as on 21.06.2010 If really they were purchased, the sale deeds in respect of the entire land, in spite of sufficient opportunity being given by this Court in the course of hearing, when they have produced other documents and the sale deeds are yet to see the light of the day. In respect of placement of firm order of plant and machinery, they referred to the photocopy of the agreement. It has been already discussed at length. No firm order has been placed was produced before this Court as on 21.06.2010 which is the position even to this day. However, they gave the particulars regarding payment of Cheque No. 68908 dated 15.05.2008 Except the cheque No. and date, nothing is produced on record to show what is the amount paid under the said cheque. The said amount is conspicuously missing. That apart, that is a cheque which is said to have been issued to Bank of India where in the reply to the show cause notice, they have stated that the term loan facility is made available by Indian Overseas Bank and thus, Bank of India do not find a reference at all. Even before the Court, they were unable to furnish the amount of the said cheque and proof for payment of the said amount. They have also referred to a copy of the letter placing the order for boiling house to M/s. Kay Bouvet Engineering (P) Ltd having been submitted to the authorities. No such copy of the letter is produced before this Court. In so far as commencement of the Civil Work is concerned, they rely on the agreement with Shree Sabari Constructions dated 3 April 2008. We have discussed at length about the validity of the said agreement and the particulars of the cheque makes it clear that the payment is made on 30.06.2008 that is subsequent to the expiry of two years period and the said payment is made through IDBI Bank, Tirupur Branch which is not the Bank which is approached by M/s. Shivashakti Sugars Limited for financial assistance to set-up a sugar factory at Saudatti Village. Thereafter, M/s. Shivashakti Sugars Limited addressed a letter to the Director (Cost), Government of India, Ministry of Consumer Affairs, on 22.07.2010 setting-out the steps they have taken for setting up the industry. They again reiterated that they have purchased 77.17 acres of land and registered in the name of Shivashakti Sugars and the copies of the sale deed are already submitted to the Director (Cost) along with their letter dated 21.6.2010 Even as on 22.07.2010, they are still ascertaining for placement of boiler, turbines and mills, the major machinery's required for the sugar factory. Very interestingly, they have stated that without waiting for sanction of loan by Banks, they have invested Rs. 10 crores so far. As is clear from the material on record that even as on 22.07.2010, Banks had not sanctioned the finance for setting-up of sugar factory at Saundatti Village. The documents on which they rely on points out that no loan facility was obtained for setting-up of a sugar factory at Saudatti Village. Therefore, it is clear that even as on 22.07.2010, no loan had been sanctioned for setting-up of a sugar factory and they have spent upto Rs. 10 crores on their own. In the documents produced, it was contended that the Civil Works is entrusted to Sabari Constructions, Coimbatore and payment of Rs. 10,00,000/- was made on 30.06.2008 But in this letter, it is stated that for construction of building for sugar factory, they have made an agreement with M/s. Pratibha Constructions Ltd. It was further contended that 10% of the civil works are over and further works are under progress i.e as on 22.07.2010 Therefore, the agreement with the Sabari Constructions do not reflect the true state of affairs and as on 22.07.2010, only 10% of the civil work was over which clearly demonstrate that no civil work had been taken before the expiry of two years period as falsely contended by them in their quarterly report. Therefore, this letter unequivocally justifies the findings, which we have recorded above on appreciation of material placed on record. In fact, strangely, though letter refers to a letter from the Director (Cost), Ministry of Consumer Affairs, Food and PD, New Delhi No. 25(2052)/2007-ST/184 dated 17 June 2010, we really do not find how the letter dated 17.06.2010 can find reference in letter dated 22.07.2010

150. Strangely, the Chief Director (Sugar), Government of India, after referring to the correspondence proceeded to pass an order dated 18 August 2010, which reads as under:—

“No. 25(1985)/07-ST/244

Government of India

Ministry of Consumer Affairs,

Food and Public Distribution,

Department of Food and Public Distribution,

(Directorate of Sugar)

Krishi Bhavan, New Delhi,

Dated 18 August 2010.

Sub: Setting-up of sugar factory by M/s. Shivashakti Sugars Ltd. at village Saudatti, Raibag Taluka, District Belgaum, Karnataka — reg.

Whereas, the sugar factory of M/s. Shivashakti Sugars Limited, (hereinafter referred to in short as M/s. SSL) was taken on record as a “New Sugar Factory” as provided in Explanation 2 to Clause 6A of Sugarcane (Control) (Amendment) Order, 2006 vide Directorate of Sugar's order dated 15.04.2008 in reference to the IEM No. 3080.SIA/IMO/2006 dated 08.06.2006

2. Whereas, Clause 6C of the Sugarcane (Control) (Amendment) Order, 2006 provides that the time limit for taking effective steps would be two years and commercial production should commence within four years with effect from the date of filing of the IEM with the Central Government failing which the IEM shall stands derecognized as far as provision of the Sugarcane (Control) Order, 1966 are concerned and the Performance Guarantee of Rupees one crore shall be forfeited. However, the proviso below Clause 6C authorizes the Chief Director (Sugar), Department of Food and Public Distribution-, Ministry of Consumer Affairs, Food and Public Distribution to given extension of one year not exceeding six months at a time, for implementing the IEM and commencement of commercial production on the recommendation of the concerned State Government;

3. Whereas, the Government of Karnataka vide letter dated 09.03.2010 recommended the case of M/s. SSL for grant of extension for six months for implementing the IEM and commencement of commercial production;

4. Whereas, a Show Cause notice was issued to M/s. SSL on 27.04.2010 directing them to explain as to why they did not take effective steps within the stipulated time;

5. Whereas, M/s. SSL submitted detailed reply vide their letters dated 06.05.2010 (received on 26.05.2010), 21.06.2010 and 22.07.2010;

6. Whereas, the explanation of the M/s. SSL has been considered and found satisfactory; and

7. Now, therefore, I.R.P Bhagria, Chief Director (Sugar), Department of Food and Public Distribution, in exercise of the powers conferred by Clause 6C of the Sugarcane (Control) (Amendment) Order, 2006 drop the Show-Cause notice dated 27.04.2010 and grant extension of time for six months with effect from 07.06.2008 to implement the IEM No. 3080.SIA/IMO/2006 dated 08.06.2006 and commence commercial production thereof by 07.12.2010 failing which the said Performance Guarantee shall be forfeited. Further, M/s. SSL are directed to send the progress report with regard to implementation of the aforesaid IEM to this Department on quarterly basis in the prescribed proforma as enclosed with Order dated 15.04.2008

(R.P Bhagira)

Chief Director (Sugar)

M/s. Shivashakti Sugars Limited

Mayoor Chitra Mandir Road,

At Post Ankali, Raibag Taluka,

District-Belgaum,

Karnataka.”

151. A reading of the order makes it clear that they were satisfied with the explanation offered by M/s. Shivashakti Sugars Limited and in exercise of powers conferred by Clause 6C of the Sugarcane (Control) (Amendment) Order, 2006 dropped the show cause notice dated 27.04.2010 and granted extension of time for six months with effect from 07.06.2008 to implement the IEM dated 08.06.2006 and commercial production thereof by 07.12.2010 failing which the said Performance Guarantee shall be forfeited. Further, M/s. SSL was also directed to send the progress report with regard to implementation of the aforesaid IEM to this Department on quarterly basis in the prescribed proforma.

152. The Shivashakti Sugars could not implement the IEM within the said six months period. Again, Government of Karnataka on 16.11.2010 made a recommendation for further extension of time, which reads as under:—

“GOVERNMENT OF KARNATAKA

(Commissioner for Cane Development and Director of Sugar)

No. DSK/DEV/57/2006-07Office of the

Commissioner for Cane

Development and

Director of Sugar, Bangalore.

No. DSK/DEV/57/2006-07Date: 16/11/2010

The Secretary to Government,

Commerce & Industries Department,

Vikasa Soudha, Bangalore.

Sub: Shivashakti Sugars Ltd.—New Sugar unit at Saudatti Village of Raibag Taluk, Belgaum District-Recommendation for extension of time — reg.

Ref: 1. Letter dated 27.1.2010 of M/s. Shivashakti Sugars Limited

2. IEM No. 3080.SIA/IMO/2006 dated 8.6.2006

3. Letter No. CI/41.SGF/2010 dated 9.3.2010

4. Letter No. CI/245.SGF/06 dated 23.6.2007

5. Letter No. CI/245.SGF/06 dated 4.8.2007

6. Letter dated 9.11.2010 of M/s. Shivashakti Sugars Ltd.,

M/s. Shivashakti Sugars Ltd., a new sugar unit at Saundatti Village of Raibag Taluk, Belgaum District vide reference (6) above have requested for 2 extension of time for another six months from 8.6.2010 for implementing the IEM. They have obtained IEM on 8.6.2006 vide reference (2) above. As per the Sugarcane (Control) Amendment Order, 2006, Clause 6-A, Explanation-4, the following effective steps should be taken by the concerned persons to implement the IEM 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 loan from Banks or financial institutions.

e) Any other steps prescribed by the Central Govt. in this regard through a Notification.

Clause 6-C reads as follows:

“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 of IEM with the Central Govt. failing which the IEM shall stand de-recognized as far as provisions of the Sugarcane (Control) Order are concerned and the performance guarantee shall be forfeited:

Provided that 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.”

The Government of Karnataka has recommended to Government of India vide reference (3) above for extension of time for another six months. So far extension letter from Government of India has not been received, M/s. Shivashakti Sugars has again requested for 2 extension.

M/s. Shivashakti Sugars Ltd., have reported that they have taken most of the effective steps mentioned in para above (copy enclosed).

Since M/s. Shivashakti Sugars Ltd. has reported that they have already taken most of the effective steps like purchase of land, placement of order for plant and machinery etc., it is requested to kindly recommend the case of M/s. Shivashakti Sugars Ltd., Saundatti Village, Raibag Taluk, Belgaum District, to Government of India for extension to time by another six months from 8.12.2010 for implementing the IEM and commence commercial production thereof.

The Government of Karnataka has already given in principle approval and cane area for this unit vide order cited at reference (4) and (5) above respectively.

Meanwhile, M/s. Renuka Sugars Ltd., has filed a writ petition against Government of India and others in W.P No. 64254/2010 (GM) with a prayer to stay the operation and exhibition of IEM dated 19.10.2007 The matter is pending before the Hon'ble High Court of Karnataka, Circuit Bench, Dharwad (copy enclosed).

Copy of the letter received from the factory is enclosed.

Yours faithfully,

Commissioner for cane Development

and Director of Sugar.

Copy to M/s. Shivashakti Sugars Ltd., #624, 11 Main, HAL 2 Stage, Indiranagar, Bangalore-38.

Commissioner for cane Development

and Director of Sugar.”

153. Acting on the said recommendation, fully knowing that the matter is pending before the Court, the 2 extension of time as sought for was granted as per Annexure-R71 dated 1 December 2010. The same reads as under:—

No. 25(1985)/07-SST/412

Government of India

Ministry of Consumer Affairs, Food& Public Distribution

Department of Goods and Public Distribution

(Directorate of Sugar)

Krishi Bhavan, New Delhi.

Dated 1 December, 2010.

Sub: Setting up of sugar factory by M/s Shivashakti Sugars Ltd. at village Saundatti, Taluka-Raibag, District Belgaum, Karnataka — reg.

Whereas, the proposed sugar factory of M/s Shivashakti Sugars Ltd. (hereinafter referred to in short as M/s SSL) was taken on record as a “New Sugar Factory” as provided in Explanation 2 to Clause 6A of the Sugarcane (Control) Order, 1966 vide Order dated 15.04.2008 in reference to the IEM No. 3080.SIA/IMO/2006 dated 08.06.2006 subsequently amended vide Amendment No. 1 dated 10.10.2007

2. Whereas, Clause 6C and 6D of the Sugarcane (Control) (Amendement) Order, 2006, provide that the time limit for taking effective steps would be two years and commercial production should commence within four years with effect from the date of filing the IEM with the Central Government failing which the said performance Guarantee shall be forfeited. However, the proviso below Clause 6C authorizes the Chief Director (Sugar), Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution to give extension of one year not exceeding six months at a time, for implementing the IEM and commencement of commercial production on the∼-recommendation of the concerned State Government.

3. Whereas, M/s SSL, on the recommendation of Government of Karnataka, was granted 1 extension of time for six months to implement the above said and commence commercial production thereof by 07.12.2010

4. Whereas, the Government of Karnataka vide letter No, CI 212 SGF 2010 dated 19.11.2010 has recommended 2 extension of time for a period of six months to implement the IEM and commencement of commercial production. It is mentioned therein that the Commissioner for Cane Development and Director of Sugar has informed the State Government that M/s. SSL have taken most of the effective steps like (I) Purchase of land (ii) Placement of plant and machinery etc.

4.1 Whereas, M/s. Renuka Sugars Ltd, has filed a Writ Petition No. 65454/2010 (GM) against the UOI & Others in the Circuit Bench of Hon'ble High Court of Karnataka at Dharwad praying, inter-alia, to declare that IEM dated 08.06.2006 as amended on 19.10.2007 has stood to be lapsed and de-recognized at law.

5. Now, therefore, I, R.P Bhagria, Chief Director (Sugar) in view of the recommendation of the Government of Karnataka and in exercise of powers conferred by Clause 6C of the Sugarcane (Control) Order, 1966 accede to the request of M/s SSL and grant further extension of time for six months IEMe., upto 07.06.2011 to implement the above said IEM and commence the commercial production thereof.

This Order is subject to outcome of Writ Petition No. 65454/2010 pending before the High Court of Karnataka.

(R.P Bhagira)

Chief Director (Sugar)

M/s. Shivshakti Sugars Ltd.,

Maurya Chitra Mandir,

Ankali, Taluka — Chikod,

District — Belgaum, Karnataka

154. The W.P No. 64254/2010 was filed on 17.06.2010 Whereas W.P Nos. 66903-907/2010 & 66926-935/10 and W.P Nos. 66920/2010 & 66972-990/10 were filed on 14.09.2010 and W.P No. 37143/2010 was filed on 26.11.2010

155. Therefore, it is clear that the 1 extension of time which is granted on 18.08.2010 is subsequent to the filing of the writ petition in W.P No. 64254/2010. Whereas, the 2 extension of time was passed during the pendency of all these writ petitions.

156. It is in this context, Sri. Vijayashankar, Learned Senior Counsel submitted that once the authorities have passed an order extending the time, a presumption could be drawn that they have applied their mind and the order of extension is in accordance with law and all factors which need to be taken is taken note off and the very extension is a proof that all legal requirement is met and the Court in its power of judicial review cannot go into these facts. In support of their contention, they relied on the judgment of the Apex Court in the case of the Assistant Collector Of Customs v. Charan Das Malhotra† . AIR 1972 SC 689. In the said judgment it is pointed out that the enquiry to be held by the Collector has to be on facts i.e material placed before him. Therefore, if the material on record do not constitute a sufficient cause and an order is passed without taking into consideration the said material placed on record, it would be a case of a non-exercise of power which is vested in law. No doubt, the act confers power for extension of time. If any authority exercises such power bona-fide on being satisfaction about the legal requirements, certainly, the Courts declined to interfere with such orders. But if the authority which is vested with the said power do not exercise the power in accordance with law, ignores the undisputed facts and then, passes an order, it would be a case of perverse exercise of power which calls for judicial interference because the power to extend time cannot be exercised arbitrarily. It has to be exercised in accordance with law. It should satisfy the test of Article 14 of the Constitution. For exercise of that power as said in the aforesaid judgment, it is not the satisfaction of the authority but it should be based on record. When the power is conferred to extend the time before the expiry of stipulated expired, such a power cannot be exercised after the expiry of the stipulated period. If even in such cases, the power is exercised, it is in excess of jurisdiction which is vested in such authority under law. In this contention, several judgments were referred to which are as under:—

Mandatory or directory: in, in the case of Dalchand v. Municipal Corporation, Bhopal . AIR 1983 SC 303, the Apex Court has led the following test:

“There are no ready tests or invariable formulae to determine whether a provision is mandatory or directory. The broad purpose of the statute is important. The object of the particular provision must be considered. The link between the two is most important. The weighing of the consequence of holding a provision to be mandatory or directory is vital and, more often that not, determinative of the very question whether the provision is mandatory or directory. Where the design of the statute is the avoidance or prevention of public mischief, but the enforcement of a particular provision literally to its letter will tend to defeat that design, the provision must be held to be directory, so that proof of prejudice in addition to non-compliance of the provision is necessary to invalidate the act complained of. It is well to remember that quite often many rules, though couched in language which appears to be imperative, are no more than mere instructions to those entrusted with the task of discharging statutory duties for public benefit. The negligence of those to whom public duties are entrusted cannot by statutory interpretation be allowed to promote public mischief and cause public inconvenience and defeat the main object of the statute. It is as well to realise that every prescription of a period within which an act must be done is not the prescription of a period of limitation with painful consequences if the act is not done within that period. Rule 9(j) of the Prevention of Food Adulteration Act, as it then stood, merely instructed the Food Inspector to send by Registered post copy of the Public Analyst's Report to the person from whom the sample was taken within 10 days of the receipt of the report. Quite obviously the period of 10 days was not a period of limitation within which an action was to be initiated or on the expiry of which a vested right accrued. The period of 10 days was prescribed with a view to expedition and with the object of giving sufficient time to the person from whom the sample was taken to make such arrangements as he might like to challenge the report of the Public Analyst, for example, by making a request to the Magistrate to send the other sample to the Director of the Central Food Laboratory for analysis. Where the effect of non-compliance with the rule was such as to wholly deprive the right of the person to challenge the Public Analyst's Report by obtaining the report of the Director of the Central Food Laboratory, there might be just cause for complaint, as prejudice would then be writ large. Where no prejudice was caused there could be no cause for complaint. I am clearly of the view that Rule 9(j) of the Prevention of Food Adulteration Rules was directory and not mandatory.”

157. What is substantial compliance: the Apex Court in the case of the Commercial of Central Excise, New Delhi v. Hari Chand Shri Gopal . Civil Appeal Nos. 1878-1880/2004 with Civil Appeal No. 1631/2001 and Civil Appeal Nos. 568-569/2009 decided on 18th November, 2010, explaining the meaning of the substantial compliance has held as under:

“Para 24: The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the “essence” or the “substance” of the requirements. Like the concept of “reasonableness”, the acceptance or otherwise of a plea of “substantial compliance” depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means “actual compliance in respect to the substance essential to every reasonable objective of the statute” and the Court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed.

In other words, a mere attempted compliance may not be sufficient, but actual compliance of those factors which are considered as essential.”

158. When an extension of time after the expiry of the period stipulated under law, the Apex Court in the case of The Assistant Collector Of Customs v. Charan Das Malhotra† (Supra) in held as under:—

Para 13. The question, therefore, is as to the nature of such a function and power entrusted to and conferred on the Collector by the proviso. It will be noticed that whereas sub-Section (1) of Section 110 uses the expression “reason to believe” for enabling a Customs officer to seize goods, the proviso to sub-Section (2) uses the expression “sufficient cause being shown”. It would seem that sub-Section (1) does not contemplate an inquiry at the stage of seizure, the only requirement being the satisfaction of the concerned officer that there are reasons to believe that the goods are liable to confiscation by reason of their illegal importation. Even so, such satisfaction, as laid down in Narayanappa v. Commissioner of Income Tax, Bangalore, 63 ITR 219 : (AIR 1967 SC 523), is not absolutely subjective inasmuch as the reasons for his belief have to be relevant and not extraneous. It is clear that the legislature was not prepared to use the same language while giving power to the Collector to extend time and deliberately used the expression “sufficient cause being shown”. The point is why should the legislature have used such a different expression while enacting the proviso if its intention was to confer power which would depend on a mere subjective satisfaction as to the cause for extension. The words “sufficient cause being shown” must mean that the Collector must determine on materials placed before him that they warrant extension of time. Where an order is made in bona fide exercise of power and within the provisions of the Act which confers such power, the order undoubtedly is immune from interference by a Court of law, and therefore, the adequacy of the cause shown may not be ground for such interference. But there can be no doubt at the same time that the inquiry to be held by the Collector has to be on facts, i.e, materials placed before him. There is therefore no question in such cases of the subjective satisfaction of the Collector, for, what he is asked to do by the proviso is to determine that the cause shown before him warrants an extension of time.”

159. The Apex Court in the case of Mahanth Ram Das v. Gang A. Das . AIR 1961 SC 882 held as under:—

“Para 5: The case is an unfortunate and unusual one. The application for extension of time was made before the time fixed by the High Court for payment of deficit Court fee had actually run out. That application appears not to have been considered at all, in view of the peremptory order which had been passed earlier by the Division Bench hearing the appeal, mainly because on the date of the hearing of the petition for extension of time, the period had expired. The short question is whether the High Court, in the circumstances of the case, was powerless to enlarge the time, even though it had peremptorily fixed the period for payment. If the Court had considered the application and rejected it on merits, other considerations might have arisen; but the High Court in the order quoted, went by the letter of the original order under which time for payment had been fixed. Section 148 of the Code, in terms, allows extension of time, even if the original period fixed has expired, and Section 149 is equally liberal. A fortiori, those Sections could be invoked by the applicant, when the time had not actually expired. That the application was filed in the vacation when a Division Bench was not sitting should have been considered in dealing with it even on July 13, 1954, when it was actually heard. The order, though passed after the expiry of the time fixed by the original judgment, would have operated from July 8, 1954. How undesirable it is to fix time peremptorily for a future happening which leaves the Court powerless to deal with events that might arise in between, it is not necessary to decide in this appeal. These orders turn out, often enough to be inexpedient. Such procedural orders, though peremptory (conditional decrees apart) are, in essence, in terrorem, so that dilatory litigants might put themselves in order and avoid delay. They do not, however, completely estop a Court from taking note of events and circumstances which happen within the time fixed. For example, it cannot be said that, if the appellant had started with the full money ordered to be paid and came well in time but was set-up on and robbed by thieves on the day previous, he could not ask for extension of time, or that the Court was powerless to extend it. Such orders are not like the law of the Medes and the Persians. Cases are known in which Courts have moulded their practice to meet a situation such as this and to have restored a suit or proceeding, even though a final order had been passed. We need cite only one such case, and that is Lachmi Narain Marwari v. Balmakund Marwari, ILR 4 Pat 61 : (AIR 1924 PC 198). No doubt, as observed by Lord Phillimore, we do not wish to place an impediment in the way of Courts in enforcing prompt obedience and avoidance of delay, any more than did the Privy Council. But we are of opinion that in this case the Court could have exercised its powers first on July 13, 1954, when the petition filed within time was before it, and again under the exercise of its inherent powers, when the two petitions under Section 151 of the Code of Civil Procedure were filed. If the High Court had felt disposed to take action on any of these occasions ss. 148 and 149 would have clothed them with ample power to do justice to a litigant for whom it entertained considerable sympathy, but to whose aid it erroneously felt unable to come.”

160. The Calcutta High Court in the case of Lila Deb Chowdhury v. State of West Bengal . 2002 1 CALT 278 HC held if there is no express legislative intent in the amendment effected to the Land Acquisition Act, 1894 to revive an acquisition notice which stood lapsed by reason of the mandate contained in Section 7A of the Act. No requisition order could be issued after the lapse of time. They proceeded to held that:

“By reason of the acquisition notice becoming then void, in the absence of an appropriate mandate of the legislature, the requisition, which has come to an end by reason of the selfsame notice, will not revive. It is to be kept in mind that the Land Acquisition Act, 1894 does not authorise requisition, it, by reason of the amendment, only authorise acquisition of land which has already been requisitioned in accordance with the authority of Law.”

161. The Andhra Pradesh High Court in the case of Mohd. Safdar Shareef & Others… v. Mohammed Ali & Another… . 1993 1 ALT 522 at Para 10 explaining the meaning of the word abatement held as under:—

“The meaning of the word ‘abate’ as per Law Lexicon of Venkataramaiya's, is “to throw down, to beat down, destroy, quash; to do away with; to put an end to, to nullity, to make void”. In view of this meaning, the appeal which has abated by operation of law, cannot be revived and the decree which has become a nullity being a decree against a dead person, cannot also be revived. Therefore, the inescapable result of the above discussion is that the appeal before the learned single Judge has become abated and the decree passed by him is a nullity.”

162. The Calcutta High Court in the case of Achintya Ghosh v. State Of West Bengal & Ors. . 2007 4 CHN 705 dealing with the question of extension of time under the Land Acquisition Act held “law is well-settled to the effect that result flowing from a statutory provision is never an evil and Court has no power to ignore that provision to relieve what it considers a distress resulting from its operation; whether the Court likes the result or not, the statute has to be given effect to.

Further, it held as under:—

“Since the petitioner had not commenced construction within two years, the building permit by operation of law had lapsed and the same could not have been given a fresh lease of life by an order passed by the Executive Engineer. Any action of a public authority which is palpably contrary to the provisions of law cannot vest a citizen with an enforceable right. The said order for all intents and purposes is non-est and is declared so.”

163. The Apex Court in the case of State of Karnataka v. Shankara Textiles Mills Limited (Supra) dealing with the question where a specific order of conversion is necessary to utilise an agricultural land which for all intended and purpose is situated in adopted area and used for non-agricultural purpose held as under:—

“Para 7: The obvious purpose of this Section is to prevent indiscriminate conversion of agricultural land for non-agricultural use and to regulate and control the conversion of agricultural land into non-agricultural land. Section 83 of that Act provides for different rates of assessment for agricultural and non-agricultural land. That provision strengthens the presumption that agricultural land is not to be used, as per the holder's sweet will, for non-agricultural purposes. This is also clear from the absence of any provision under that Act requiring permission to convert non-agricultural land into agricultural land. In a country like ours, where the source of livelihood of more than 70 per cent of the population, is agriculture, the restriction placed by the Revenue Act is quite understandable. Such provisions and restrictions are found in the Revenue Acts of all the States in the country. The provision has, therefore, to be construed as mandatory and given effect to as such.”

164. The Apex Court in the case of M.I Builders Pvt. Ltd. v. Radhey Shyam Sahu . 1999 6 Supreme Court Cases 464 dealing with judicial review on administrative action, which is illegal in contravention of the prescribed procedure, unreasonable or irrational or mala-fide results in bad Governments and sets bad example and the Court can interfere in such cases, held at para 59 as under:—

“Para 59: When we keep in view the principles laid by this Court in its various judgments and which we have noticed above, it has to be held that the agreement dated November 4, 1993 is not a valid one. The agreement defies logic. It is outrageous. It crosses all limits of rationality. The Mahapalika has certainly acted in fatuous manner in entering into such an agreement. It is a case where the High Court rightly interfered in exercise of its powers of judicial review keeping in view the principles laid by this Court in Tata Cellular v. Union Of India. decision of the authority except the judicial decision is amenable to judicial review and reviewability of such a decision cannot now be questioned. However, a judicial review is permissible if the impugned action is against law or in violation of the prescribed procedure or is unreasonable, irrational or mala-fide. On the principle of good governance reference was made to a decision of Division Bench of Bombay High Court in State of Bombay v. Laxmidas Ranchhoddas (AIR 1952 Bombay at p. 475) (Para 12). It was submitted that bad governance sets a bad example. That is what exactly happened in the present case.”

165. The Apex Court in the case of Pleasant Stay Hotel v. Palani Hills Conservation Council 17. 1999 6 Supreme Court Cases 464 observed as under:—

“…acceptance thereof would mean giving judicial imprimatur to utter and flagrant breach of statutory provisions to which the Hotel resorted to in spite of repeated opportunities given and reminders issued to retrace their steps and any sympathy shown to the Hotel would be wholly misplaced.”

166. The Apex Court in the case of Cantonment Board, Jabalpur v. S.N Avasthi . 1995 Supp. 4 SCC 595, 596 observed as under:

“…construction made in contravention of law would not be a premium to extend equity so as to facilitate violation of the mandatory requirements of law.”

167. The Apex Court in the case of Pratibha Co-Operative Housing Society Ltd. v. State of Maharashtra . 1991 3 SCC 341 held as under:—

“… Before parting with the case we would like to observe that this case should be a pointer to all the builders that making of unauthorised constructions never pays and is against the interest of the society at large. The rules, regulations and by-laws are made by the Corporations or Development Authorities taking in view the larger public interest of the society and it is the bounden duty of the citizens to obey and follow such rules which are made for their own benefits.”

168. The Apex Court in the case of Dr. Gn. Khajuria v. Delhi Development Authority . 1995 5 SCC 762, observed as under:—

“… The same is that a feeling is gathering ground that where unauthorised constructions are demolished on the force of the order of Courts, the illegality is not taken care of fully inasmuch as the officer of the statutory body who had allowed the unauthorised construction to be made or make illegal allotments go scot free. This should not, however, have happened for two reasons.”

169. From the aforesaid judgments, it is clear that a judicial review is permissible if the impugned action is against the law or in violation of the prescribed procedure or is unreasonable or irrational or malafide.

170. The statutory provisions confers such power for extension of time and prescribes that effective steps should be taken within two years failing which the IEM shall stands de-recognised. In other words, the IEM shall stands de-recognised if effective steps are not taken within 2 years from the date of filing of IEM. The said de-recognition is by operation of law. After said legal effect, if an IEM is to be given life, there should be a specific provision empowering the authority to bring back to life of the dead IEM. Keeping in mind, the difficulties that an entrepreneur may face in keeping with these time stipulation, specific provision is provided for extension of time. Therefore, necessary application for extension of time to extend the period statutorily prescribed is to be made before the expiry of time limit. When the statute specifically prescribes the consequences of not performing acts within the stipulated time, before such a legal consequence flow, the extension of time is to be granted. Once, the legal effect as prescribed under the statute takes place in the absence of a specific provision in the very same statute, the clock cannot be put back. That is precisely what the Director of Sugars in his show cause notice has pointed out to the Shivashakti Sugars. That is the Shivashakti Sugars has not made a request for extension of time. The recommendation for extension of time has been made after the period prescribed for taking effective steps, the same has no value. Hence, they were asked to show cause as to why Performance Guarantee should not be forfeited. The State Government while making the recommendation has not kept in mind these legal requirements and they have recommended a case, which do not satisfy the legal requirement. On the contrary the contents of the very letter shows that the effective steps had not been taken within the stipulated time and legal requirements had not complied with. The extension of time arise only if effective steps as contemplated under the Statute is not taken within the two years, and extension is sought for, for such implementation. Now the extension request is made beyond one year period. Therefore, the authority had no jurisdiction to grant the extension, which it has granted. As is clear from the extension order, the extension is given after the expiry of two years. Therefore, the said extension is illegal and liable to be set-aside. In fact, the extension is granted after filing of the writ petition complaining to the Court that Shivashakti Sugars has not taken effective steps, their IEM stands de-recognised but still they are proceeding with the implementation of the project illegally contrary to law. In fact in the second recommendation, the pendency of these writ petitions proceedings also referred and ignoring the same, second extension of time is granted. When the authority had no power to grant extension i.e after expiry of 2 years period and even after expiry of one year period, after 2 years period and this extension are given during the pendency of these proceedings, it is a clear case of non-application of mind, abuse of authority which is vested in them, exercising of power, contrary to statutory provisions and illegal. In fact, it is void ab initio, non-est in the eye of law. In those circumstances, as these documents have come into existence subsequent to the filing of these writ petitions, it has no value in the eye of law and requires to be quashed and accordingly, it is quashed.

Maintainability of the writ petitions:

171. It was contended that the petitioner in W.P No. 64254/2010 is a rival in the business and therefore, he has no right to maintain the writ petition at all challenging any setting-up of an industry by his rival. In support of the said contention, reliance is placed on the judgment of the Apex Court in the case of The Nagar Rice and Flour Mills v. N. Teekappa Gowda & Bros. (Supra). The Apex Court dealing with the right of a competitor to challenge the establishment of a rice mill by another, held as under in paras 9 and 10:

“9. The Parliament has by the Rice Milling Industry (Regulation) Act, 1968, prescribed limitations that an existing rice mill shall carry on business only after obtaining a licence and if the rice mill is to be shifted from its existing location, previous permission of the Central Government shall be obtained. Permission for shifting their rice mill was obtained by the appellants from the Director of Food & Civil Supplies. The appellants had not started rice milling operations before the sanction of the Director of Food & Civil Supplies was obtained. Even if it be assumed that the previous sanction has to be obtained from the authorities before the machinery is moved from its existing site, we fail to appreciate what grievance the respondents may raise against the grant of permission by the authority permitting the installation of machinery on a new site. The right to carry on business being a fundamental right under Article 19(1) (g) of the Constitution, its exercise is subject only to the restrictions imposed by law in the interests of the general public under Article 19(6)(i).

10. Section 8(3)(c) is merely regulatory: if it is not complied with, the appellants may probably be exposed to a penalty, but a competitor in the business cannot seek to prevent the appellants from exercising their right to carry on business, because of the default, nor can the rice-mill of the appellants be regarded as a new rice mill. Competition in the trade or business may be subject to such restrictions as are permissible and are imposed by the State by a law enacted in the interests of the general public under Article 19(6), but a person cannot claim independently of such restriction that another person shall not carry on business or trade so as to affect his trade or business adversely. The appellants complied with the statutory requirements for carrying on rice milling operations in the building on the new site. Even assuming that no previous permission was obtained, the respondents would have no locus standi for challenging the grant of the permission, because no right vested in the respondents was infringed.”

172. The aforesaid judgment makes it clear that competition in the trade or business may be subject to certain restrictions as are permissible and are imposed by the state by a law enacted in the interest of the general public, but a person cannot claim independently on such restriction, any other person shall not carry on business or trade so as to affect his trade or business. In that case, the appellant had complied the statutory requirements for carrying Rice Milling operations in the building and new site and therefore, it was held, whether rival cannot question the setting-up of a rice mill in accordance with law, that is not the position herein. The objections to raising of a sugar factory is because of the prohibition contained in the statute for establishment of a factory within 15 Kms. from the existing sugar factory. The petitioner has taken the existing sugar factory on lease for a period of 30 years on a monthly rental of Rs. 130.00 crores. He has already paid Rs. 58 crores to the Government under the terms of the lease deed. He has to extend the sugar factory and also should invest the money in the industry as per the agreed terms. It is in that context, when yet another sugar factory is sought to be established within the prohibited area, he is approaching this Court. It is not a case where petitioners are challenging their right on Shivashakti Sugar Ltd., to set-up an industry. Shivashakti Sugars has a fundamental right to set up an industry, but it is subject to the restrictions imposed under law. When the law prohibits establishment of a sugar factory within 15 kms. from the existing sugar factory, he cannot be heard to say that the petitioner who is a rival in the business cannot maintain petition challenge as illegal action and therefore, on that ground, the petition cannot be rejected.

173. Secondly, it was contended, the petition is liable to be rejected on the ground of delay and laches. The argument is IEM was filed on 08.06.2006 At that point of time, this rival in the business was nowhere in the picture. He became a successful bidder and a lease deed came to be executed only on 16.10.2008, by which time, nearly two years has lapsed and therefore, he cannot file petition in 2010, on 17.06.2010 challenging the setting-up of the factory.

174. We have also discussed about how IEM filed on 08.06.2006 has spent itself. It was not filed within the time. We have also pointed out how for not taking effective steps within two years from the date of filing of the IEM, the IEM stood de-recognised. Therefore, on the day when he took out the sugar factory on lease there was no IEM in existence. However, his interest is affected only when Government made recommendation for extending the period for implementation of the IEM on 9.3.2010 This petition is filed on 17.6.2010 In fact extension is granted on 18.08.2010 after the filing of the writ petition. In the light of these undisputed facts, it cannot be said that this petition is liable to be dismissed on the ground of delay and laches.

175. In so far as other two writ petitions filed by the shareholders of the societies are concerned, it was contended that, they have no independent right to maintain the writ petition when the society itself has not chosen to file the writ petition. In support of the said contention, the judgment of the Supreme court in the case of Daman Singh v. State of Punjab . 1985 2 Supreme Court Cases 670, which reads as under:

“Once a person becomes a member of a co-operative society, he loses his individuality qua the society and he has no independent rights except those given to him by the statute and the by-laws. He must act and speak through the society or rather, the society alone can act and speak for him qua rights or duties of the society as a body. So if the statute which authorises compulsory amalgamation of co-operative societies provides for notice to the societies concerned, the requirement of natural justice is fully satisfied. The notice to the society will be deemed as notice to all its members. That is why Section 13(9)(a) provides for the issue of notice to the societies and not to individual members. Section 13(9)(b), however, provides the members also with an opportunity to be heard if they desire to be heard. Notice to individual members of a co-operative society, in our opinion, is opposed to the very status of a co-operative society as a body corporate and is, therefore, un-necessary.”

176. The said observation came to be made as is clear from the facts of the case that, in a proceeding for amalgamation of the society the law provides for notice to the society and not to its members. When the members complain that principles of natural justice is violated, the Apex Court rejected the said contention by holding that, once a person becomes a member of the co-operative society, he loses his individuality and he has no independent right except those given to him by the statute and the bye-laws. That judgment has no application to the facts of this case as in law, there is no provision in a co-operative society to give a No Objection Certificate to another company or a society to set-up a sugar factory within the prohibited area. In fact, such action on the part of the Managing Director or persons who are in management is against the interest of the society and its members. In fact, in so far as Raibagh Sugar Factory is concerned, it was at that relevant point of time under the control of the official from the co-operative society. In fact, the material on record shows, the Managing Director was removed on the ground of mis-appropriation of funds. If such persons had issued No Objection Certificate, in the absence of any statutory provision, it is against the interest of the society, members of the co-operative society who are really affected has a right to challenge the action of setting-up an industry contrary to the statutory provisions. The said act is not inconsistent with the interest of the society, on the contrary when the persons incharge of society fails to protect the interest of the society and its members, have every right to initiate legal proceedings to protect the interest of the society. On that ground it cannot be said the petition filed by them is not maintainable.

177. It was contended, all these petitioners who have preferred this petition are members of the society are instigated by the Renuka Sugars, rival in the business and it is only when no interim orders were granted by the Circuit Bench at Dharwad in their petitions, they have engineered a public interest litigation and therefore, they submit, this petition lack bona-fides.

178. If an interim order is not granted in writ petition, it does not mean that the Court is pronouncing upon merits of the case. That is not the factor which is to be taken note of. In so far as the allegation that these people are before the Court at the instigation of the rival in the business, as is clear from the record, the rival himself has filed a petition before this court. In fact, he is lessee of Raibagh Sugar Factory. He has nothing to do with the Doodganga Sugar Factory. In fact, Doodganga Sugar Factory also has preferred an independent writ petition. Therefore, we do not see any substance in any of the allegations to justify that, action of these petitioners is not bona-fides and it is actuated with malafides. As the shareholders of the society, farmers, cane growers, they contend that their interest is affected When a sugar factory is established within the prohibited area, certainly, the existing sugar factories and its members are the persons aggrieved. Therefore, on that score, these petitions cannot be dismissed.

PUBLIC INTEREST LITIGATION

179. In so far as the petition filed as public interest litigation is concerned, it was contended that there are no bona-fides. The family members of some other petitioners had initiated writ petitions which they have withdrawn. In fact, a suit is also filed which is pending. Those facts are suppressed in the writ petition and therefore, it is contended, the petition lacks bona-fides.

180. It is in this context, several judgments of the Apex Court were relied upon. Therefore, now we shall consider the law as laid down by the Apex Court regarding how these Public Interest Litigations have to be considered by this Court.

181. In a recent judgment in the case of State of Uttaranchal v. Balwant Singh Chaufal . 2010 3 SCC 402, the Supreme Court reviewed all the judgments of the Apex Court rendered the law and held as under at: paragraphs 178 & 179:

“178. We must abundantly make it clear that we are not discouraging the public interest, litigation in any manner, what we are trying to curb is its misuse and abuse. According to us, this is a very important branch and, in a large number of PIL petitions, significant directions have been given by the Courts for improving ecology and environment, and the directions helped in preservation of forests, wildlife, marine life, etc., It is the bounden duty and obligation of the Courts to encourage genuine bona-fide PIL petitions and pass directions and orders in the public interest which are in consonance with the Constitution and the laws.

179. The public interest litigation, which has been in existence in our country for more than four decades, has a glorious record. This Court and the High Courts by their judicial creativity and craftsmanship have passed a number of directions in the larger public interest in consonance with the inherent spirits of the Constitution. The conditions of marginalised and vulnerable Section of society have significantly improved on account of Court's directions in PIL.”

182. In the aforesaid case, after holding that there was clear case of abuse of process of the Court in the name of Public Interest Litigation, in order to curb its tendency effectively, they felt it was now become imperative to examine all connected issues of public interest litigation by authoritative judgment in the whole, that in future no such petition can be filed and are entertained by the Court. They have set out the definition of a public interest litigation as understood in various countries. Thereafter they have traced the origin of public interest litigation, then, the evaluation of the public interest litigation in India is also clearly set-out. Thereafter they actually divided Public Interest Litigation into three phases. Phase I deals with cases of the Supreme Court where directions and orders were passed primarily to protect fundamental rights under Article 21 of the marginased groups and sections of the society who because of extreme poverty, illiteracy and ignorance cannot approach the Supreme Court or High Courts. Phase 2 deals with cases relating to protection, preservation of ecology, environment, forests, marine life, wildlife, mountains, rivers, historical monuments, etc., Phase 3 deals with the directions issued by the Courts in maintaining the probity, transparency and integrity in governance. However, in this case we are not concerned with cases falling under phase 1 or phase 2, this case falls within Phase 3. In dealing with Transparency and Probity in Governance, they held as under in para 96:

In the 1990s, the Supreme Court expanded the ambit and scope of public interest litigation further. The High Courts also under Article 226 followed the Supreme Court and passed a number of judgments, orders or directions to un-earth corruption and maintain probity and morality in the governance of the State. The probity in governance is a sine qua non for an efficient system of administration and for the developments of the country and an important requirement for ensuring probity in governance is the absence of corruption. This may broadly be called as the third phase of the public interest litigation.”

183. They have referred to various judgments rendered by the Supreme Court under this head. They have also referred to evaluation of public interest litigation in other judicial systems, namely, Australia, UK, USA and South Africa, Bangladesh, Sri Lanka, Nepal and Pakistan. Thereafter they have also dealt with abuse of public interest litigation. Therefore, the question for consideration is the public interest litigation which is filed in this case falls within the ambit of abuse of public interest litigation or within the ambit of third phase as indicated earlier. As it was contended that it is a case of abuse of public interest litigation, let us deal with the said aspect as settled by the Apex Court in the aforesaid judgment. At para 143, it is observed as under:

“Unfortunately, of late, it has been noticed that such an important jurisdiction which has been carefully carved out, created and nurtured with great care and caution by the Courts, is being blatantly abused by filing some petitions with oblique motives. We think time has come when genuine and bona-fide public interest litigation should be discouraged. In our considered opinion, we have to protect and preserve this important jurisdiction in the larger interest of the people of this country but we must take effective steps to prevent and cure its abuse on the basis of monetary and non-monetary directions by the Courts.”

184. Then they have referred to various judgments of the Apex Court, in particular, they have referred to the judgment of the Apex Court in Holicow Pictures (P) Ltd. v. Prem Chandra Mishra . 2007 14 SCC 281. The relevant portion is as under:

“Though we spare no efforts in fostering and developing the laudable concept of PIL and extending our long arm of sympathy to the poor, the ignorant, the oppressed and the needy whose fundamental rights are infringed and violated and whose grievances to unnoticed, unrepresented and unheard; yet we cannot avoid but express our opinion that while genuine litigants with legitimate grievances relating to civil matters involving properties worth hundreds of millions of rupees and criminal cases in which persons sentenced to death facing gallows under untold agony and persons sentenced to life imprisonment and kept in incarceration for long years, persons suffering from undue delay in service matters — Government or private, persons awaiting the disposal of cases wherein huge amounts of public revenue or unauthorised collection of tax amounts are locked up, detenue expecting their release from the detention orders, etc., are all standing in a long serpentine queue for years with the fond hope of getting into the Courts and having their grievances redressed, the busy bodies, meddlesome interlopers, wayfarers or officious interveners having absolutely no public interest except for personal gain or private profit either of themselves or as a proxy of others or for any other extraneous motivation or for glare of publicity break the queue muffing their faces by wearing the mask of public interest litigation and get into the Courts by filing vexatious and frivolous petitions and thus criminally waste the valuable time of the Courts and as a result of which the queue standing outside the doors of the Courts never moves, which piquant situation creates frustration in the minds of the genuine litigants and resultantly they have lose faith in the administration of our judicial system.”

185. Again they relied on the following passage in the very same judgment which reads as under:

10. “13. Public interest litigation is a weapon which as to be used with great care and circumspection and the judiciary has to be extremely careful to see that behind the beautiful veil of public interest an ugly private malice, vested interest and/or publicity — seeking is not lurking. It is to be used as an effective weapon in the armoury of law for delivering social justice to the citizens. The attractive brand name of public interest litigation should not be used for suspicious products of mischief. It should be aimed at redressal of genuine public wrong or public injury and not publicity oriented or founded on personal vendetta.”

186. After referring to these besides they have approved the criteria prescribed in the said judgment. To satisfy the bonafides of the public interest litigation, it has set out in para 15 of the aforesaid judgment. It reads as under:

“The Court has to satisfy about (a) the credentials of the applicant; (b) the prima-facie correctness or nature of information given by him; (c) the information being not vague and indefinite. The information should show gravity and seriousness involved. The Court has to strike a balance between two conflicting interests; (i) nobody should be allowed to indulge in wild and reckless allegations besmirching the character of others; and (ii) avoidance of public mischief and to avoid mischievous petitions seeking to assail, for oblique motives, justifiable executive actions.”

187. If we apply the aforesaid criteria prescribed by the Apex Court and approved in the aforesaid judgment, what the court has to see is the credential of the petitioners. In the instant case, the petitioners are the Public Interest Litigants residents of the locality, farmers and sugar cane growers. They are not opposed to setting-up of any sugar factory. What they are interested is the sugar factories have to be set-up in accordance with law governing such establishment. These villagers cannot be characterized as busy bodies, meddlesome interlopers, wayfarers or officious interveners having absolutely no public interest. Interest for personal gain or private profit either of themsleves or as a proxy of others or any other extraneous motivation or for clare of publicity.

188. The second requirement also have a bearing on the credential of the application is the correctness or nature of information given by them. The correctness and nature of information furnished by these petitioners or petitioners in private interest litigation are not disputed. No information given by them is shown to be incorrect. Therefore, they satisfy the second test.

189. The third test is, the information should show the gravity and seriousness involved. All the information furnished by the petitioners in the Public Interest Litigation as well as the petitioners in other cases, clearly demonstrates the contravention of law by the Shivashakti Sugars in establishment of a sugar factory at every stage. Therefore, it cannot be said that these writ petitions which are filed with oblique motives without any basis and there is any illegality in the actions of the respondents. Therefore, the petitioners do satisfy the test prescribed by the Apex Court in the aforesaid judgment.

190. Realizing this, an alternative submission was pressed into service i.e, in the area there is availability of excess sugar cane because existing sugar factories are not able to purchase the sugar cane grown in the area, some other farmers are forced to sell the sugar cane to the sugar factories situated in the adjoining state of Maharashtra. The State also has contended that to mitigate the loss sustained by the sugarcane growers, they have to pay compensation as they could not find market for the sugarcane grown. As these factories are all set-up keeping in mind the sugarcane growers as excess sugarcane is available in the area, none of the petitioners are really affected by such establishment. Even if the establishment of the sugar factory is not strictly in conformity with the law and such establishment. It was also contended, the sugar factory is nearing completion and production would start. The sugarcane factory has complied substantially in the legal requirements and therefore, it was contended, in the facts of this case, no case is made out for judicial intervention.

191. This argument is quite attractive on the face of it. But, a deeper examination of this argument, if accepted by this Court would result in negation of rule of law. Before going into the particulars, it is necessary to notice the latest judgment of the Constitution Bench of the Apex Court explaining the meaning of substantial compliance which would weight with the Courts from interfering with a project of this nature.

192. The Apex Court in the case of the Commercial Of Central Excise, New Delhi v. Hari Chand Shri Gopal (Supra), in Civil Appeal Nos. 1878-1880/2004 with Civil Appeal No. 1631/2001 and Civil Appeal Nos. 568-569/2009 decided on 18 November 2010 elaborately dealt with the doctrine of substantial compliance. At Para 24, it held as under:

“Para 24: The doctrine of substantial compliance is a judicial invention, equitable in nature, designed to avoid hardship in cases where a party does all that can reasonably expected of it, but failed or faulted in some minor or inconsequent aspects which cannot be described as the “essence” or the “substance” of the requirements. Like the concept of “reasonableness”, the acceptance or otherwise of a plea of “substantial compliance” depends upon the facts and circumstances of each case and the purpose and object to be achieved and the context of the prerequisites which are essential to achieve the object and purpose of the rule or the regulation. Such a defence cannot be pleaded if a clear statutory prerequisite which effectuates the object and the purpose of the statute has not been met. Certainly, it means that the Court should determine whether the statute has been followed sufficiently so as to carry out the intent for which the statute was enacted and not a mirror image type of strict compliance. Substantial compliance means “actual compliance in respect to the substance essential to every reasonable objective of the statute” and the Court should determine whether the statute has been followed sufficiently so as to carry out the intent of the statute and accomplish the reasonable objectives for which it was passed.”

193. Keeping in mind this enunciation of law by the Apex Court as to the meaning of substantial compliance, we have to see what the Apex Court in Ojas Industries Ltd. v. Ough Sugar Mills (Supra) case dealing with these amended provisions has held. At para 26 it held as under:—

“26. India has adopted the policy of economic reforms, free trade and liberalization in 1991. The 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 31.8.1998 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.”

At Para 30, it held as under:—

“30. The Sugarcane (Control) (Amendment) Order, 2006 inserts clauses 6A-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.”

At para 34, it held as under:

“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.”

194. Following the said judgment, the Supreme Court in the case of Bajaj Hindustan Ltd. v. Sir Shadi Lal Enterprises Ltd. . 2011 1 SCC 640 at para 20, it held as under:—

“20. In view of the judgment of this Court in Ojas Industries upholding the validity of the press note prescribing distance norms and subsequent amendments in 2006 in the sugarcane (Control) Order, 1966 and making it retrospective, the issues involved in the present case have been substantially decided. The challenge of the writ petitioner in the High Court was based on the setting-up of a sugar mill in its vicinity (though beyond 15 km away) because of the policy of de-licensing prescribed under Notification dated 11-9-1998 issued in exercise of powers under Section 29-B (1) of the IDR Act, 1951. This Court has upheld the distance norms i.e a minimum distance of 15 km between two mills retrospectively. The main thrust of the petitioner's challenge to the de-licensing policy thus disappears.”

195. Therefore, it is in this context, it was contended that the language employed in this amended provision is unambiguous. Therefore, the Court should interpret those provisions keeping in mind the object with which these provisions are inserted by way of an amendment and in support of the said contention, a reliance is placed on the passage from Maxwell on the Interpretation of Statutes-11 Edition. At page 221, where it has been held as under:—

MODIFICATION OF THE LANGUAGE TO MEET THE INTENTION:

Where the language of a statue, in its ordinary meaning and grammatical construction of the apparent purpose of the enactment, or to some inconvenience or absurdity which can hardly have been intended, a construction may be put upon it which modifies the meaning of the words and even the structure of the sentence. This may be done by departing from the rules of grammar, by giving an unusual meaning to particular words, or by rejecting them altogether, on the ground that the legislature could not possibly have intended what its words signify, and that the modifications made are mere corrections of careless language and really give the true meaning. Where the main object and intention of a statue are clear, it must not be reduced to a nullity by the draftsman's unskil fulness or ignorance of the law, except in a case of necessity, or the absolute intractability of the language used. Lord Reid has said that he prefers to see a mistake on the part of the draftman in doing his revision rather than a deliberate attempt to introduce an irrational rule: “the canons of construction are not so rigid as to prevent a realistic solution”.

196. There is absolutely no quarrel with the aforesaid proposition. The question is whether these amended provisions are unambiguous. They do not reflect the intention with which these provisions are enacted. We have already set out above that even before these statutory provisions, this distance criteria was specifically enforced prior to abolition of licence and also after abolition, it is clear from the press note referred to earlier. However, while interpreting these provisions, the Allahabad High Court held that they are directory and not mandatory. That put the Central Government in a state of fix. It is in that context as they wanted these criteria to be a mandatory criteria, on legal advice, they amended the Sugar Cane Control Order by incorporating these provisions and leaving statutory recognition to the policy decision of the Government. That is why the Apex Court in the Ojas's Case has categorically held that these provisions do not state nothing new. That was the position prior to the amendment. As the said position was not backed by a statutory provision, the statute was amended. It is retrospective as well as clarificatory in nature and therefore, the intention is clear. The said course is open to the Court only when the intention is not clear and the particulars among as used words, which do not reflect the intention of the legislature. Then, the action of Court interpreting it and reiterating the Section arises. It is settled law that if the language employed in a statute is clear, unambiguous, the golden rule of interpretation says interprets the same literally. No question of interpretation arise when there is no ambiguity in the Statute. Therefore we do not see any substance in the said contention. In fact, the question whether those provisions are mandatory or directory should be gone into by the operation of law as laid down by the Apex Court in the case of of Dalchand v. Municipal Corporation, Bhopal (Supra). Wherein, the Apex Court has led the following test:

“There are no ready tests or invariable formulae to determine whether a provision is mandatory or directory. The broad purpose of the statute is important. The object of the particular provision must be considered. The link between the two is most important. The weighing of the consequence of holding a provision to be mandatory or directory is vital and, more often that not, determinative of the very question whether the provision is mandatory or directory. Where the design of the statute is the avoidance or prevention of public mischief but the enforcement of a particular provision literally to its letter will tend to defeat that design, the provision must be held to be directory, so that proof of prejudice in addition to non-compliance of the provision is necessary to invalidate the act complained of. It is well to remember that quite often many rules, though couched in language which appears to be imperative, are no more than mere instructions to those entrusted with the task of discharging statutory duties for public benefit. The negligence of those to whom public duties are entrusted cannot by statutory interpretation be allowed to promote public mischief and cause public inconvenience and defeat the main object of the statute. It is as well to realise that every prescription of a period within which an act must be done is not the prescription of a period of limitation with painful consequences if the act is not done within that period. Rule 9(j) of the Prevention of Food Adulteration Act, as it then stood, merely instructed the Food Inspector to send by Registered post copy of the Public Analyst's Report to the person from whom the sample was taken within 10 days of the receipt of the report. Quite obviously the period of 10 days was not a period of limitation within which an action was to be initiated or on the expiry of which a vested right accrued. The period of 10 days was prescribed with a view to expedition and with the object of giving sufficient time to the person from whom the sample was taken to make such arrangements as he might like to challenge the report of the Public Analyst, for example, by making a request to the Magistrate to send the other sample to the Director of the Central Food Laboratory for analysis. Where the effect of non-compliance with the rule was such as to wholly deprive the right of the person to challenge the Public Analyst's Report by obtaining the report of the Director of the Central Food Laboratory, there might be just cause for complaint, as prejudice would then be writ large. Where no prejudice was caused there could be no cause for complaint. I am clearly of the view that Rule 9(j) of the Prevention of Food Adulteration Rules was directory and not mandatory.”

197. Therefore, the test to be applied is the object with which the particular provision is enacted. In the instant case, as stated above, these provisions were incorporated because of a decision of a Allahabad High Court which said that this distance criteria is only directory and it is to get over the said judgment and to declare that it is a mandatory, these statutory provisions are enacted by way of an amendment. As held by the Apex Court in the aforesaid few judgments, it is the distance criteria. In so far as establishment of sugar factory is a very important criteria which is to be maintained especially after de-licensing of a sugar industry in the interest of sugarcane growers as well as the owners of a sugar factory.

198. It is in the aforesaid background, it is necessary to see what are the allegations made by the petitioner in Public Interest Litigation. After clearly setting-out the various contravention of various enactments and accusing respondents 1 to 17 colluding with respondent No. 18, the promoter of Shivashakti Sugars at Para 11, it is stated as under:—

“The promoter of the Company respondent No. 17 Mr. Prabhakar Kore, is a sitting Member of Parliament (Rajya Sabha) from Karnataka since 2008 and belongs to the ruling Bharatiya Janata Party in the State. He is using his political clout and exerting pressure upon the State authorities to allow him to proceed with the construction of the factory without following any of the provisions of the law. He is maliciously targeting villagers who openly express their resentment and opposition to the illegal activities and voices of people raised against construction of the factory without following the due procedure of law and the State authorities on the other hand are turning a deaf ear to the various representation made by the villagers to them. Respondent No. 17 is thus acting in a high handed manner and arm twisting the villagers and Government Officials alike in order to realize his selfish goals.”

199. The respondent No. 18 has filed an affidavit traversing these allegations. In para 15 of the Statement of Objections, the allegations in para 11 are traversed. He has stated as under:—

“15. This Respondent humbly submits that, petitioners apparently in their desperate attempt to seek the relief, have made wild and unsubstantiated allegations which are not true and his respondent hereby categorically denies the unfounded and wholly baseless allegations, made against him personally in para 11 of the writ petition. The allegations are reckless, without any basis and are defamatory in nature. Respondent-18 denies that; he has in any way committed any act, which is contrary to law, for the purposes of the construction of the 17 respondent-Factory. At any rate, he has, at no point of time, used his office or his status as a Member of the Parliament, belonging to Bharatiya Janatha Party, for the purposes of getting clearance by the State Authorities and, therefore, the said allegations are false and have been calculatedly made in order to prejudice the case in favour of the petitioners. The fact that the allegations are false, can be demonstrated by the fact that, respondent-18 became Rajya Sabha Member, sponsored by Bharatiya Janatha Party only in the year 2009, whereas, the Factory was conceived way back in the year 1996 and, all permissions including statutory clearance, were obtained much earlier to 2008. The petitioners, without ascertaining any facts, nor without any basis, have made an allegation that respondent-18 has used his position in order to get the clearance in their favour. Petitioners have not substantiated as to which of the orders are passed by which of the Authorities, under the influence or respondent-18 for getting clearance. In the absence of the same, the petition requires to be rejected with exemplary costs.”

At Para 17, he has stated as under:—

“17. However, since such wild allegations have been made, respondent-18 deems it necessary to place or record that he has done yeoman service to the cause of education and co-operative sector in the Northern part of Karnataka. He has been single handedly Instrumental providing education from Kinder Garden to Post Graduation; and extending health care to the entire region. He was nominated as a Member of the Legislative Council for the services rendered by him in co-operative sector. He was earlier a Member of Rajya Sabha in the year 1990. In all years of his public life, he has maintained high standards and has never given cause for complaints in his discharge of duties. It is false and misleading for the petitioners to contend that this respondent has exerted any political influences to violate the rule of law.”

200. In the light of these allegations and counter allegations, the material on record has to be seen. Letter of intent was filed in the year 1996. As no effective steps were taken, it lapsed. IEM was filed on 08.06.2006, 10 years thereafter. The position was in nowhere better. As we have already held that as no effective steps were taken for 2 years from the date of filing of the IEM, the IEM should de-recognised. It is only on 06.03.2009, then the Government made a recommendation for extension of time, things started moving and that is followed by two extension orders and other permissions which they have obtained.

201. It is on the record that in establishing the sugar factory, the land required is to be purchased in the name of the sugar factory. Except the 3 sale deeds, even to this day, sale deeds showing the acquisition of the land in the name of factory is not produced. What is purchased according to the respondent is an agricultural land. If the agricultural land is to be utilised for setting-up of a factory, permission for change of land used is required as per Section 95 (2) of the Karnataka Land Revenue Act. Till today, no such permission is taken and no such order is produced before us. To start an industry in a village, permission of the Village Panchayath is required as per Section 64 of the Gram Panchayath Act. In order to obtain licence, they are expected to produce the plan of the building in duplicate. The plan of building is neither produced before the Village Panchayath or before this Court showing construction is being put-up. Therefore, there is a violation of Sections 64 and 66 of the Gram Panchayath Act and the Rules framed thereunder. Under Section 7 of the Factories Act, 1948 when a factory is to be established and the building is to be constructed, they have to obtain the approval of the building plan from the Factory Inspector and obtain requisite licence. Till today, no such plan or permission sought for or obtained at any rate produced before this Court. None of the Governmental authorities have initiated action against the Company for violating these provisions as contemplated from putting up of a factory building in the agricultural land without permission. As it is clear from the IEM, the factory is to be set-up in Saudatti Village and it is for that purpose they have obtained a no objection certificate from Karnataka State Pollution Control Board. Infact, such a No Objection Certificate is required before construction. From the material on record, it clarifies that the factory is constructed in Yadrav Village. Whereas, they have obtained No Objection Certificate for Saudatti Village and not for Yadrav Village. Therefore, from these substantiated facts on record, by producing relevant material, it is clear that things started moving only after 2009 and therefore, the allegations made by the petitioners in the writ petitions cannot be said to be baseless or meritless, res ipsa loquitor.

JUSTIFICATION FOR INTERFERENCE

202. In the background of all these discussion, the larger question which this case throws open for consideration is, if an entrepreneur establishes an industry, without following the procedure prescribed under law, and in contravention of law governing such establishment the Government and its agencies instead of taking action against such illegal actions, aids and abets such illegal action under purported exercise of powers under statute, what is the remedy to a law abiding citizen of this country. Has he to be a silent spectator of such illegal activity. Does he have any right to move the Courts for enforcement of law and upholding the rule of law. What should be the approach of the Courts, especially when High Court is approached under Article 226 of the Constitution of India, either by way of public interest litigation or as a private interest litigation.

203. The breach of a statutory duty created for the benefit of an individual or a class is a tortuous act. In order to succeed in an action for damages for breach of statutory duty the plaintiff must establish a breach of statutory obligation which, on the proper constitution of the statute was intended to be a grant of civil liability to a class of persons of whom he is one. He must establish an injury or damage of a kind against which the statute was designed to give protection. The statutory authorities act for the public benefit in enforcing the law. Where they act in excess of the powers conferred by the Act, or abuse those powers then in those cases it is not exercising its jurisdiction irregularly or wrongly but it is usurping powers which it does not possess. The right to build on his own land is a right incidental to the ownership of that land. Within the Municipality or Village, the exercise of that right has been regulated in the interest of the community residing within the limits of the Municipality or Village. If under the pretence of any authority which the law does give to the Municipality or Panchayth it goes beyond the line of its authority, and infringes or violates the rights of others, it becomes like all other individuals amenable to the jurisdiction of the Courts. If sanction is given to build by contravening a bye-law, the jurisdiction of the Courts will be invoked on the ground that the approval by an authority of building plans which contravene the bye-laws made by that authority is illegal and inoperative. When that being so, if buildings are erected without permission and sanction of the plan, the said construction is ex-facie illegal and cannot be permitted. An illegal construction materially affects the right to or enjoyment of the property by persons residing in the area. The authorities own a duty and obligation under the statute to see that such unauthorised constructions are not put up. The law is for the benefit of residents of the locality. The authorities act in aid of the statute. The rights of the residents in the area are invaded by an illegal construction. It is to be remembered that law is meant for orderliness in accordance with the requirements of the residents in a locality or village. If law is nullified by arbitrary acts in excess, and derogation of power or non-exercise of power conferred on them, the Courts owe a duty to the public to quash such orders, in order to maintain and uphold the rule of law. An excess of statutory power or no exercise of such power cannot be validated by acquiescence in or by the operation of an estoppel. The Courts of equity would not permit the statute to be made an instrument of fraud. In a democracy wedded to the rule of law and governed by a written constitution, both the ruler and the ruled are governed by the rule of law. As the ruler expects the subjects to obey and observe the law, the ruler is also under an obligation to obey and observe the law. No one is above law. However, high one may be, law is above him.

204. The Government Policy as reflected in the Press Notes issued from time to time indicates the distance between two Sugar Factories was a primary concern. Gradually, from 40 kms it was reduced to 25 kms and from 25 kms it was reduced to 15 kms. While granting licence to start a new Sugar Mill, the Licencing Authority kept in mind this particular aspect and declined to grant licence, if this condition is not fulfilled. That is how the Government regulated the establishment of Sugar Factories at a particular distance which is based on public policy. When the Licence Raj came to be abolished, this primary concern as reflected in the Government policy found recognition by way of statutory provision. When there was no necessity for obtaining a licence to establish a Sugar Factory, if a person establishing a Sugar Factory within the aforesaid distances, there was no mechanism through which it could be controlled and regulated. Therefore the necessity for a statutory provision arose. Therefore Section 6-A was introduced by way of amendment which categorically states that no new Sugar Mill could be established within 15 kms from an existing Sugar Mill. Therefore, this insistence of a distance of 15 kms between two Sugar Mills is every much necessary in the interest of public at large, sugarcane growers and producers of sugar. Therefore, this legal requirement has to be interpreted keeping in mind the state of affairs which was prevailing prior to the said amended provision.

205. The object of licence was to enforce the rule of law. Instead of enforcing the law, when it was abused, in the name of licencee and permission, to set-up an industry, it was abolished in the interest of industrial growth of the Country, in public interest What is dispensed with is the licence and permission and not the rule of law. With the abolition of Licence Raj, the entrepreneurs has to obey the rule of law, and establish industry in accordance with the law governing that industry. Now they cannot abuse the law, taking advantage of the abolition of Licence. On the contrary, as there is no Government control by way of licence, the law governing the establishment of industry has to be strictly construed and enforced, as otherwise it would lead to lawlessness, and the public confidence in rule of law will be seriously affected. Then might become right. The persons who are wealthy, in power, or close to the corner of power, will rule the roost. Rule of law would become a casualty. Therefore, the role of Courts assumes utmost importance, and that would be the last resort to the believers in rule of law.

206. The Apex Court in the case of Indian Council for Enviro-Legal Action v. Union of India . 1996 5 SCC 281, though dealing with the environmental issues, has held as under:—

“26. Enactment of a law, but tolerating its infringement, is worse than not enacting a law at all. The continued infringement of law, over a period of time, is made possible by adoption of such means which are best known to the violators of law. Continued tolerance of such violations of law not only renders legal provisions nugatory but such tolerance by the enforcement authorities encourages lawlessness and adoption of means which cannot, or ought not to, be tolerated in any civilized society. Law should not only be meant for the law-abiding but is meant to be obeyed by all for whom it has been enacted. A law is usually enacted because the legislature feels that it is necessary.

When a law is enacted containing some provisions which prohibit certain types of activities, then, it is of utmost importance that such legal provisions are effectively enforced. If a law is enacted but is not being voluntarily obeyed, then, it has to be enforced. Otherwise, infringement of law, which is actively or passively condoned for personal gain, will be encouraged which will in turn lead to a lawless society.”

207. In the background of the aforesaid discussion, when the violation of law is clearly established, when, the petitioners who have approached the Court have a right and when they establish a public wrong and when the Government and its agencies instead of enforcing the law and taking action against the violators aids and abets such violation by a positive action, the Courts cannot be silent spectators. In the society, where money, power, nearness counts, it is not easy for any honest, tax payer to rise his voice against the atrocities which these people commit and come to Court for upholding the rule of law. If persons who come to court risking their interest and establish in a Court of law the violation of several provision of legislation in establishing of such an industry, their complaints cannot be thrown out on the ground of delay, laches and on other considerations. A public wrong where all the possible laws have been violated and the State and its instrumentality's have not taken any action and taking advantage of the situation if construction are put up, money is invested and even Statutory Authorities have granted extension of time and permission ignoring the law and principles and when the matters reached to Courts, the Courts cannot be just remain silent spectators. If that is permitted, it would render the statute to be a instrument of fraud. It is the duty of the Courts to take into consideration the totality of the circumstance and if the public wrong is substantiated from the material on record to the maximum extent, then it will be the duty to strike down such illegal action, prevent further actions and also direct the authorities to take action against the violators of law. If there is a substantial compliance with the statutory provisions and every things goes in accordance with law, in such circumstances, the Court in its equitable jurisdiction can throw away the petitions of the petitioners on the ground of delay and laches or like terms.

208. It is unfortunate that the Central Government has laid down a sugar policy and was carefully monitoring them from time to time. The policy of the Central Government is reflected in the press note issued from time to time. When the Allahabad High Court held mat the policy as evidenced in these press notes are directory in nature and set-aside the action of the Central Government in preventing a factory being set-up within the radius of 15 kms, the Central Government was not prepared to accept the said decision. They approached the Law Department to find a way out to enforce these distance criteria inspite of the judgment of Allahabad High Court. It is on the advice of the Legal Department, the Government made a statutory rule by amending the Sugarcane Control Order. This action of the Central Government was upheld by the Apex Court. After all these when it came to the enforcement of these Government orders, in spite of the judicial pronouncement having now held it to be mandatory which is consistent view of the Central Government throughout have failed to give effect to these provisions. In the show-cause notice issued to Shivashakti Sugars, they have clearly set-out all these provisions. As on the date, there was a recommendation by the State Government for extension of time, which is referred to in the show cause notice. Further, they have made it very clear that the said recommendation has been made, after the stipulated period of two years because after the expiry of two years period, if effective steps are taken, the IEM stands de-recognized. When the show cause notice was replied to by the Shivashakti Sugars giving particulars, they were not satisfied with the particulars furnished by them. Once again, they were called upon to furnish better particulars. Even after furnishing the better particulars, they were not satisfied with the furnished information. Even on the recommendation made by the State Government effective steps had not been taken. Unfortunately, the Central Government has exercised its powers on extension in a very casual manner without taking into consideration the relevant factors, without taking into consideration the fact in the first place that when there is clear violation of Clause 6B of the order. Even otherwise, IEM stood de-recognized because Shivashakti Sugars utterly failed to take effective steps within two years from the date of filing of IEM. No effective steps were taken. No extension of time sought for by party or by the Government and even the recommendation of the Government is after the expiry of the two years period. This is not the way the authorities who is vested with the power to enforce these mandatory provisions should exercise these power. It has granted extension by mere looking into the recommendation of the Government without applying its mind and when the statutory requirements are not complied with and more over, when they have no jurisdiction to extend the said time as no request was made before the expiry of two years period. It is in this context, the Apex Court in the aforesaid judgment has opined that mere making of law is not sufficient, if there is no enforcement of law, it is better to not to make law, otherwise, there is no meaning in Rule of law. It is a fit case where the Central Government should take note off these facts how the persons who are entrusted with the responsibility of implementing these Sugarcane Control Order, who have been vested with the discretionary power of exercising for enlarging the time for implementing the project have been exercising powers and in the interest of sugarcane growers/manufacturers and the public at large. Appropriate action should be initiated against these violators of law. Similarly if the State Government is the believer in the rule of law, it should take appropriate action against all the authorities who have not taken action against the violators of the law. If no such action is taken, the only inference that could be drawn is that the State is also a party to these violation and they are aiding and abetting all these illegal activities because of the reasons mentioned in the writ petition at paragraph 11 which fully stands substantiated.

209. In fact, a reliance was placed on the judgment of Kissan Sahkari Chini Mills Ltd. v. Union of India (Supra) passed by the Allahabad High Court where a sugar factory which is established in violation of the aforesaid provisions, was allowed to continue to operate. As it is clear from the facts of that case, production of the sugar factory had commenced on 30.10.2005 before these amended provisions came into force. It is in that context, in view of the earlier judgment of the Allahabad High Court holding that the distance criteria is only directory, the Allahabad High Court extended the said benefit and the said judgment has been affirmed by the Apex Court. As the facts of the case are totally different, that judgment has no applicable on the facts of the case.

210. In that view of the matter, in the instant case, we are satisfied in the first place that all the petitions both in the PIL as well as in private litigation, cannot be characterized as a frivolous petition. The petitioners have established the public wrong from the undisputed document and therefore, they are entitled to all the reliefs as set-out in the writ petitions. Hence, we pass the following:

1. All the writ petitions are allowed.

2. The IEM filed on 08.06.2006 has spent itself for non-compliance of the requirement as mentioned in Clause 6B of the Sugar Cane (Control) (Amendment) Order, 2006.

3. Even otherwise, IEM filed on 08.06.2006 stands de-recognized as no effective steps were taken within a period of two years from the date of its filing.

4. The order of extension granted by the Central Government which is dated 18.08.2010 and 01.12.2010 are one without jurisdiction, void, ab initio, non-est in the eye of law as they had no power in first place to grant extension as the IEM stood de-recognized and also on the ground of the same being in excess of the authority as being in contravention of these statutory provisions.

5. The Deputy Commissioner, Belgaum, the Village Panchayath of Saudatti Village and Yadrav Village and the jurisdictional Inspector of Factories are hereby directed to take appropriate action in accordance with law for violating the provisions of Gram Panchayath Act, 1993, Factories Act, 1948 and the Karnataka Land Revenue Act, 1964 and also the provisions of the Karnataka Land Reforms Act, 1961.

6. The Central Government shall take appropriate action against the authorities for exercising the power of extension in derogation of the spirit of the amended clauses of the Sugar (Control) Order.

In W.P No. 66920/2010 & 66972-990/2010 on 18.10.2010, an interim order was passed to the effect that all steps to be taken by Shivashakti Sugars will be subject to the ultimate result of the writ petition.

Now the Writ Petition is allowed. All actions taken from the date of the interim order till to-day by the Shivashakti Sugars are invalidated and they shall not proceed further in the matter.

Misc. Writ No. 12188/2010 in W.P 37143/2010 for impleading is dismissed as having become infructuous.

Misc. Writ No. 2607/2011 in W.P No. 66920/2010 & 66972-990/2010 for stay is dismissed as having become infructuous.

Misc. Writ No. 2647/2011 in W.P No. 66920/2010 & 66972-990/2010 for amendment of the writ petition is allowed. The petitioners to amend the writ petition.

Ordered accordingly.