M/S. Kisan Sahkari Chini Mills Ltd. v. The Union Of India And Others

1. Affidavits have been exchanged. We have heard the learned counsel for the parties. The writ petition is being finally disposed of at the stage of admission.

2. This writ petition was filed on 15th April 2005 for restraining the respondent No. 5 i.e M/s. Dwarikesh Sugar Industries Ltd. from setting up a sugar factory at the particular site namely plot (Gata) No. 2 in village Bahadarpur, Tehsil Dhampur, District Bijnore, in the State of Uttar Pradesh on the ground that the said site where the factory was proposed to be constructed was at a distance of 13.5 kilometers from the factory of the petitioner. The petitioner's sugar factory is located on land falling in three villages namely, Rajpur, Pooranpur and Nadehi in district Udham Singh Nagar of Uttaranchal State. No interim order was granted in this matter.

3. The basic ground taken in the writ petition is that the minimum distance between two sugar factories should be 15 kilometers as prescribed by the Press Note No. 12 dated 31st August, 1998 issued by the Department of Industrial Policy and Promotion, Ministry of Industry, Government of India. A copy of the Press Note is annexed as Annexure-6 to this writ petition. This distance between the two factories is disputed and as per documents filed by the respondent No. 5 issued by the same Authority namely Survey of India, and as per counter affidavit of the State the distance is more than 15 Km.

4. Before we take up this issue, we will dispose of another aspect of the case.

5. In the writ petition the petitioner has also prayed for quashing of the Notification of Department of Industrial Policy and Promotion, Ministry of Industry, Government of India, dated 11 September 1998, annexed as Annexure-7 to this writ petition. That notification has been issued in exercise of the power under section 29 B (1) of the Industries (Development and Regulation) Act, 1951 (65 of 1991), (hereinafter referred to as IDR Act for short). By that notification the Central Government deleted item No. 4 relating to “sugar” and the entries thereunder from the Schedule II of the Notification of the same Department No. S.O 477 (E) dated 25 July 1991.

6. A little clarification is required here. In Schedule II of the IDR Act, “sugar” is one of the industries mentioned at item 25. As such, sugar industry becomes capable of regulation under the powers conferred by the IDR Act. In exercise of powers of that Act, the Central Government had issued the Notification No. S.O 477(E) dated 25 July 1991 mentioning a list of industries for which licencing was made compulsory by that notification. In the Schedule II of that Notification (as distinguished from Schedule II of IDR Act) “sugar” was mentioned at item No. 4. Further under the heading “sugar” at item 4, “cane-sugar’, “refined and other sugars’ including “centrifugal sugar’ are sub-heads. Thus it was because of the Notification dated 25 July 1991 that for sugar industry licensing became compulsory meaning that no sugar factory could be established without a licence. The item 4 of Schedule II of the Notification dated 25 July 1991 was amended by the Notification dated 11 September 1998 and “sugar” as well as all its sub-heads were deleted. Thus the requirement of compulsory licensing of the industries relating to sugar and the aforesaid related items ceased, meaning thereby that license under the IDR Act ceased to be necessary for setting up an industry relating to the said item of sugar and the said related items.

7. This de-licensing was challenged in a writ petition filed by M/s. Monnet Sugars Limited being Writ Petition No. 36685 of 2004. That writ petition was allowed by a Division Bench of this Court vide judgment dated 24 August 2005 and the Notification of de-licensing was quashed thereby the pre- 11 September 1998 position was restored; and obtaining of licence for establishing sugar industries became necessary again. Against the said decision of this Court, an appeal was preferred to the Supreme Court, being Petition for Leave to Appeal (Civil) No. 18580 of 2005, which is still pending and in which leave has been granted and the judgment of this Court has been stayed vide order dated 19 September 2005.

8. Thus, firstly this issue is already sub-judice before the Supreme Court. Secondly in Monnet's case this Court had adjudicated the issue on the same lines as suggested by the petitioner, and the Supreme Court has stayed the judgment. Thirdly whatever final decision is given by the Supreme Court, being law declared by the Supreme Court, will be binding on all. There is no reason to think that if ultimately the Supreme Court dismisses the appeal (in Monnet's case) and restores compulsory licensing, the judgment of the Supreme Court will not provide for the fate of the units or industries which have been set-up without licence between the date when de-licensing was done by the Central Government and the date on which de-licensing was quashed by this Court.

9. It would therefore not be appropriate to adjudicate upon this question in this writ petition.

10. Reverting back to the first ground, Sri Arun Kumar Gupta, Advocate, relied upon the Press Note No. 12 dated 31 August 1998, by which the Central Government decided to delete “sugar” from the list of industries requiring compulsory licensing under the provisions of IDR Act. He emphasized upon the part of that Press Note which reads as follows:

“However, in order to avoid unhealthy competition among sugar factories to procure sugarcane, a minimum of 15 kilometers would continue to be observed between an existing sugar mill and a new mill by exercise of powers under Sugarcane (Control) Order, 1966.”

11. According to Sri Gupta, representing the petitioner the above indicates that while delicencing sugar industry the Central Govt. decided and directed by the above passage in the Press Note that no sugar factory should be allowed to be set up within 15 Km of an existing sugar factory. Prima facie, we are unable to accept this submission for the simple reason that the words quoted above themselves seem to suggest that directions about 15 Km restriction will be issued under the Sugarcane (Control) Order, 1966. Such directions could only be issued by a Gazzette notification under clause 6 of that Control Order which itself has been framed under section 3 of the Essential Commodities Act, 1955. No such Gazzette Notification has been brought to our notice. However in view of the ground on which we propose to dismiss this petition, we do not consider it necessary to examine this question in detail.

12. The respondent No. 5 has placed on record material to show that the entire factory has been already been set-up with the investment of more than a hundred crore rupees, reserve area has been allocated and the factory has gone into production as evidenced by the numerous documents filed by the respondent No. 5 along with the supplementary affidavit of Naubahar Singh Ahlawat, sworn on 5 January 2006. These facts stand corroborated by the short counter affidavit filed by the Dy. Cane Commissioner Moradabad on behalf of respondents No. 3 and 4.

13. It has to be examined whether at this stage, this Court in exercise of its discretionary writ jurisdiction should direct the uprooting of the entire factory of the respondent No. 5 merely on the ground that the distance between the two factories, even as per the own case of the petitioner (vide annexure 3 to the supplementary affidavit of Mahabir Singh sworn on 2-12-2005) is 13.828 kilometers, which is short of the permissible distance by less than 1.2 kilometers.

14. During the arguments, while expressing our disinclination to interfere in the matter, we had pointed to Sri Arun Kumar Gupta, advocate that if the two factories are located at the permissible distance of 15 kilometers from each other, each has a free area of 7.5 kilometers in the direction of the other factory. By the alleged violation of the distance norm, the free area of each factory becomes 6.914 kilometers, i.e, the free area of 7.5 kilometers is reduced by a mere 0.586 kilometers, which is not likely to have such a major impact on sugar cane procurement as would persuade the Court to pass the drastic order of uprooting the factory.

15. In reply to this query of the Court, Sri Arun Kumar Gupta referred to the provisions of U.P Sugarcane (Regulation of Supply and Purchase) Act, 1953, U.P Sugarcane (Regulation of Supply and Purchase) Rules, 1954 [rule 22(a)], U.P Sugarcane (Purchase Tax) Act, 1961 and submitted that all these legislations are concerned with ensuring adequate supply of sugarcane to each sugar factory. He also submitted that because of construction of this factory of the respondent No. 5 at less than the permissible distance, the sugarcane supply of the petitioner is likely to be reduced. He has also relied upon a cane area reservation order dated 17 October 2005, enclosed as Annexure-5 to the supplementary affidavit of Mahabir Singh, sworn on 2nd December 2005, for showing that certain part of the reserved area of the petitioner has been allocated to the factory of the 5 respondent. But the reservation order enclosed is in respect of the factory of the respondent No. 5. The petitioner has failed to enclose the reservation order of the petitioner to show that the petitioner's factory has not been allocated areas earlier reserved for other sugar factories. More importantly as pointed out by Sri Navin Sinha representing respondent No. 5, there are no factual pleadings by the petitioner regarding the extent of sugarcane available, its ratio to the drawal capacity of the petitioner and how the petitioner would be prejudiced by the allocation of some of the areas to the factory of the respondent No. 5. Sri Navin Sinha pointed out that in paragraphs 28, 30 and 31 of the writ petition, which are the only paragraphs dealing with the question there are no specific averments or details on the above point. He also pointed out that in paragraphs 15 and 18 of the counter affidavit of the respondent No. 5, it has been specifically stated that for the crushing season 2004-05, the petitioner was able to maintain only a drawal percentage of 41 per cent from its reserved/assigned area. It has also been stated in the same paragraphs that the petitioner itself proposed assignment of centers to other sugar mills in the State of Uttaranchal, which indicates that the petitioner had more than adequate quantity of sugarcane available to it. These paragraphs 15 and 18 are only vaguely replied to in paragraphs 8 and 10 of the rejoinder affidavit. The rejoinder affidavit does not deny these specific allegations about the petitioner's drawal percentage or the proposal of the petitioner to surrender its sugarcane purchase centers in favour of other sugar mills. Moreover, the short counter affidavit of the Dy. Cane Commissioner Moradabad says in para 7 that there is no shortage of sugar cane in that area and the Petitioner has been given sufficient sugar cane area.

16. Sri Sinha has also relied upon the decisions of a learned Single Judge of this Court in the case of Miracle Sugar Factory v. State of U.P, A.I.R 1995 All 231 and of a Division Bench of this Court in the case of Treveni Engineering Works Ltd. v. Union of India, A.I.R 1996 All 420, for the proposition that this distance norm of 15 Km is merely a guiding policy and can not be interpreted or applied in rigid manner like a mandatory provision of a Statute.

17. The petitioner has also moved an application for amendment, which has been allowed today by a separate order and the writ petition has been heard after taking into account the proposed amendments.

18. By the amendment, the petitioner challenges the orders passed by the various authorities on the various representations on the same point of distance restriction of 15 kilometers and an attempt had also been made to challenge the order of the Cane Commissioner regarding reservation of areas. So far as the order of the Cane Commissioner is concerned, it is an appealable order and according to the petitioner's own case, the petitioner has already filed an appeal before the State Government, which is pending. Therefore, we are not inclined to go into the correctness of that order inasmuch as the alternative appellate proceedings are already pending. So far as the orders passed by other authorities are concerned, which have upheld the setting up of the factory of the respondent No. 5, the matter need not detain us as we have already stated above that in view of the decisions of this Court, the 15 Km distance restriction can not be applied rigidly like a mandatory statutory provision. The policy of that 15 Km norm is basically intended to ensure adequate sugar cane procurement by each factory. The alleged violation of that norm reduces the area of the petitioner by only half a kilometer in only one direction. There are no factual pleadings about the availability of area in other directions of the petitioner's factory, or about the impact of this reduction or area upon the quantity of sugarcane which would be available to the petitioner's factory in the light of the petitioner's capacity and its past drawal performance.

19. Further, the 15 kilometers norm is at best a policy of the Central Government, because no such statutory order has been shown to have been issued under the Sugarcane (Control) Order, 1966, by publication in the official gazette as required by clause 6 thereof. The Government of India which has made that policy has itself taken a decision in the case of Sri Gurudatt Sugars Ltd. District Kolhapur (Maharashtra), where the setting up of the factory by Gurudatt Sugars Ltd., at a distance of 14.2 kilometers from an existing sugar factory had been challenged. The decision of the Government of India dated 20 February 2004, communicated by covering letter dated 8 March 2004 has been enclosed as the 12 annexure to the supplementary counter affidavit on behalf of the respondent No. 5 sworn by Naubahar Singh Ahlawat on 18 October 2005. This decision was taken pursuant to a direction of Bombay High Court in Writ Petition No. 3364 of 2003 and Writ Petition No. 8842 of 2003. The Government of India has taken the decision that the factory of M/s. Gurudatt Sugars Ltd., has been set-up and commissioned a month prior to the date of the said decision of the Central Government and the project has become fait accompli, in which financial institutions/banks have substantially invested and, therefore, the Ministry decided that the factory of M/s. Gurudatt Sugars Ltd., should be allowed to continue despite violation of the 15 Km norm.

20. When the Government of India has itself interpreted its own guidelines in the above manner, we see no reason to adopt a different approach in our discretionary jurisdiction under Article 226 of the Constitution of India and to direct uprooting of the factory of Respondent No. 5, project cost of which is mentioned as Rs. 133.62 crores out of which Rs. 90 crore has been financed by the Punjab National Bank as per annexure S.C.A 3 to the supplementary counter affidavit of Naubahar Singh Ahlawat sworn on 18 October 2005.

21. In the circumstances, we decline to interfere in this matter on the ground that the distance between the two factories is less than 15 kilometers.

22. The writ petition is dismissed accordingly.

23. Parties to bear their own costs.