Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 12
CASE NO.:
Appeal (civil) 1730 of 2007
PETITIONER:
M/s. Ojas Industries (P) Ltd
RESPONDENT:
M/s. Oudh Sugar Mills Ltd. & Others
DATE OF JUDGMENT: 02/04/2007
BENCH:
DR. ARIJIT PASAYAT & S.H. KAPADIA
JUDGMENT:
KAPADIA, J.
(Arising out of S.L.P. (C) No.7690 of 2006)
WITH
Civil Appeal NO. 1731 of 2007 arising out of SLP(C)No.7990/06
Civil Appeal NO. 1732 of 2007 arising out of SLP(C)No.7991/06
Civil Appeal NO. 1735 of 2007 arising out of SLP(C)No.8774/06
Civil Appeal NO. 1734 of 2007 arising out of SLP(C)No.8772/06
Civil Appeal NO. 1733 of 2007 arising out of SLP(C)No.8770/06
T.P.(C) No.421/06
T.P.(C) NO.623/06
Leave granted in petitions for special leave.
In this batch of matters we are required to interpret
Press Note No.12 dated 31.8.1998 issued by Government
of India, Ministry of Industry, concerning de-licensing of
Sugar Industry.
For the sake of convenience we state the facts
occurring in Civil Appeal No. of 2007 arising out of
S.L.P.(C) No.7690 of 2006 - M/s. Ojas Industries (P) Ltd.
Versus M/s. Oudh Sugar Mills Ltd. & Others.
Proliferation of Industrial Entrepreneur
Memorandums to block competition is the cause of
dispute.
On 31.8.98 Government of India (for short, ’GOI’)
decided to delete sugar industry from compulsory
licensing under the Industries (Development and
Regulation) Act, 1951 (For short, ’1951 Act’). In that
Press Note No.12, GOI clarified that in order to avoid
unhealthy competition among sugar factories to procure
sugarcane, a minimum distance of 15 KMs has to be
observed between an existing sugar mill and a new mill
(factory). Further, the entrepreneur who desires to avail
of the de-licensing of sugar industry was required to file
an Industrial Entrepreneur Memorandum (for short,
’IEM’) with the Ministry of Industry. In the said Press
Note it was further clarified that those entrepreneurs who
have been issued Letter of Intent (for short, ’LOI’) for
manufacture of sugar need not file an initial IEM and in
such cases, the LOI Holders shall file Part ’B’ only of the
IEM at the time of commencement of commercial
production.
The Notification dated 11.9.98 was issued under
Section 29B(1) of the said 1951 Act. It had to be read
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 12
with Press Note No.12 dated 31.8.98. It was issued to
usher in the policy of de-licensing.
After de-licensing 2232 IEMs were filed till July
2005 out of which 600 IEMs were filed in U.P.
On 13.5.04 M/s. Ojas Industries (P) Ltd. (for short,
’Ojas’) filed its IEM for setting up a sugar mill at village
Baisagapur, Distt. Lakhimpur Kheri, U.P. It was
acknowledged by GOI. Ojas claims to have obtained
permission for purchase of lands under U.P. Zamidari
Abolition & Land Regulation Act. It claims to have placed
orders for entire plant and machinery from M/s. S.S.
Engineers, Pune in February 2005. It claims to have
placed an order of the value of Rs.8.65 crores for
construction of the factory building. It also claims to
have made financial tie-ups with banks and other
financial institutions for meeting expenses of more than
Rs.20 crores. It claims to have approached U.P. Pollution
Control Board for grant of NOC dated 28.4.05. It claims
to have obtained such NOC. Ojas claims to have spent
Rs.20 crores under various Other Heads. After four days
on 17.5.04, M/s. Oudh Sugar Mills Ltd. (for short,
’Oudh’) filed its IEM for setting up a sugar mill (factory) at
village Saidpur, Khurd, Distt. Lakhimpur Kheri, U.P.
within 7.2 Kms from the proposed sugar mill of Ojas in
Basaigapur. This has led to the dispute between the two
companies.
On 23.4.05 Ojas filed its Writ Petition No.7123/05
before the Delhi High Court for setting aside the IEM filed
by Oudh. On 28.5.05 Oudh filed a writ petition in Delhi
High Court bearing No.9892/05 to set aside the IEM filed
by M/s. Bajaj Hindustan Ltd. for setting up the sugar
mill in Titarpur.
On 30.6.2005, pursuant to the Orders of the Delhi
High Court, the matter was heard by Chief Director,
Sugar, (GOI) who approved the IEM filed by Ojas. The
IEM filed by Oudh was disapproved. Aggrieved by the
decisions of the Chief Director, Sugar, (GOI), Oudh filed
Writ Petition No.11748/05. On 26.7.05 Oudh filed
another Writ Petition No.12078/05 challenging the IEM
of M/s. Bajaj Hindustan Ltd. for setting up its sugar mill
at village Khambarkhera.
Be that as it may, by the impugned judgment dated
22.12.05 the Division Bench of the
Delhi High Court held that the Notification dated 11.9.98
read with the Press Note No.12 dated 31.8.98 prescribing
15 KMs distance between existing sugar mill and a new
sugar mill did not operate to the prejudice of Oudh and
that it was open to Oudh or any one else to establish a
sugar mill beyond 15 KMs of an existing sugar mill. It
was held that the Central Government had executive
powers under Article 73 of the Constitution of India to
issue the said Press Note No.12. It was further held that
the said Press Note, however, applied only to cases where
a new mill (factory) is proposed to be set up within 15
KMs of an existing sugar mill. According to the
impugned judgment, therefore, in the absence of existing
sugar mill the said Press Note No.12 dated 31.8.98 had
no application. On facts, it was, therefore, held that Ojas
cannot derive any benefit from the said Press Note No.12
dated 31.8.98. In the circumstances, by the impugned
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 12
judgment it has been held that the said Press Note
applies only when there is an existing sugar mill.
Accordingly, by the impugned Writ Petition No.7123/05
filed by Ojas for setting aside the IEM filed by Oudh stood
dismissed. Whereas Writ Petition No.11748/05 filed by
Oudh was allowed and the orders passed by the Chief
Director, Sugar, dated 30.6.05 was set aside.
Consequently, by the impugned judgment Writ Petition
No.12078/05 filed by Oudh challenging the IEM of M/s.
Bajaj Hindustan Ltd. for Khambarkhera was also
dismissed.
Aggrieved by the impugned judgment dated
22.12.05 Ojas have come to this Court by way of civil
appeals.
Before proceeding further we may point out that in
the impugned judgment vide para ’63’ , the High Court
observed that it was always open to the Central
Government to amend Press Note No.12 dated 31.8.98
and provide that if an IEM is filed by one party, then the
subsequent IEM for setting up a sugar mill within 15
KMs of the place indicated by the Earlier IEM will not be
entertained. This is now precisely done by Union of
India. It has issued Sugarcane (Control) (Amendment)
Order, 2006 on 10.12.06 inter alia laying down the
effective steps which the applicant is required to take.
The said Sugarcane (Control) (Amendment) Order, 2006
has inserted Clauses 6A to 6E into Sugarcane (Control)
Order, 1966. We quote hereinbelow the newly added
clauses which read as under:
"6A. Restriction on setting up of two sugar
factories within the radius of 15 Kms. \026
Notwithstanding anything contained in clause
6, no new sugar factory shall be set up within
the radius of 15 Kms of any existing sugar
factory or another new sugar factory in a state
or two or more states:
Provided that the State Government may
with the prior approval of the Central
Government, where it considers
necessary and expedient in public
interest, notify such minimum distance
higher than 15 Kms or different
minimum distances not less than 15 Kms
for different regions in their respective
States.
Explanation 1.- An existing sugar factory
shall mean a sugar factory in operation
and shall also include a sugar factory
that has taken all effective steps as
specified in Explanation 4 to set up a
sugar factory but excludes a sugar
factory that has not carried out its
crushing operations for last five sugar
seasons.
Explanation 2.- A new sugar factory shall
mean a sugar factory, which is not an
existing sugar factory, but has filed the
Industrial Entrepreneur Memorandum as
prescribed by the Department of
Industrial Policy and Promotion, Ministry
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 12
of Commerce and Industry in the Central
Government and has submitted a
performance guarantee of rupees one
crore to the Chief Director (Sugar),
Department of Food and Public
Distribution, Ministry of Consumer
Affairs, Food and Public Distribution for
implementation of the Industrial
Entrepreneur Memorandum within the
stipulated time or extended time as
specified in clause 6C.
Explanation 3.- The minimum distance
shall be determined as measured by the
Survey of India.
Explanation 4.- The effective steps shall
mean the following steps taken by the
concerned person to implement the
Industrial Entrepreneur Memorandum for
setting up of sugar factory:-
(a) purchase of required land in the name
of the factory;
(b) placement of firm order for purchase
of plant and machinery for the factory
and payment of requisite advance or
opening of irrevocable letter of credit
with suppliers;
(c) commencement of civil work and
construction of building for the
factory;
(d) sanction of requisite term loans from
banks or financial institutions;
(e) any other step prescribed by the
Central Government, in this regard
through a notification.
6B. Requirements for filing the Industrial
Entrepreneur Memorandum. \026
(1) Before filing the Industrial Entrepreneur
Memorandum with the Central Government,
the concerned person shall obtain a certificate
from the Cane commissioner or Director
(Sugar) or Specified Authority of the concerned
State Government that the distance between
the site where he proposes to set up sugar
factory and adjacent existing sugar factories
and new sugar factories is not less than the
minimum distance prescribed by the Central
Government or the State Government, as the
case may be, and the concerned person shall
file the Industrial Entrepreneur Memorandum
with the Central Government within one
month of issue of such certificate failing which
validity of the certificate shall expire.
(2) After filing the Industrial Entrepreneur
Memorandum, the concerned person shall
submit a performance guarantee of rupes one
crore to Chief Director (Sugar), Department of
Food and Public Distribution, Ministry of
Consumer Affairs, Food and Public
Distribution within thirty days of filing the
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 12
Industrial Entrepreneur Memorandum as a
surety for implementation of the Industrial
Entrepreneur Memorandum as a surety for
implementation of the Industrial Entrepreneur
Memorandum within the stipulated time or
extended time as specified in clause 6C failing
which Industrial Entrepreneur Memorandum
shall stand de-recognized as far as provisions
of this Order are concerned.
6C Time limit to implement Industrial
Entrepreneur Memorandum.-
The stipulated time for taking effective steps
shall be two years and commercial production
shall commence within four years with effect
from the date of filing the Industrial
Entrepreneur memorandum with the Central
Government, failing which the Industrial
Entrepreneur Memorandum shall stand de-
recognized as far as provisions of this Order
are concerned and the performance guarantee
shall be forfeited:
Provided that the Chief Director (Sugar),
Department of Food and Public
Distribution, Ministry of Consumer
Affairs, Food and Public Distribution on
the recommendation of the concerned
State Government, may give extension of
one year not exceeding six months at a
time, for implementing the Industrial
Entrepreneur Memorandum and
commencement of commercial production
thereof.
6D. Consequences of non-implementation
of the provisions laid down in clauses 6B
and 6C.- If an Industrial Entrepreneur
Memorandum remains unimplemented within
the time specified in clause 6C, the
performance guarantee furnished for its
implementation shall be forfeited after giving
the concerned person a reasonable opportunity
of being heard.
6E. Application of clauses 6B, 6C and 6D to
the person whose Industrial Entrepreneur
Memorandum has already been
acknowledged.-
(1) Except the period specified in sub-
clause (2) of clause 6B of this Order,
the other provisions specified in
clauses 6B, 6C and 6D shall also be
applicable to the person whose
Industrial Entrepreneur
Memorandum has already been
acknowledged as on date of this
notification but who has not taken
effective steps as specified in
Explanation 4 to the clause 6A.
(2) The person whose Industrial
Entrepreneur Memorandum has
already been acknowledged as on
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 12
date of this notification but who has
not taken effective steps as specified
in Explanation 4 to the clause 6A
shall furnish a performance
guarantee of rupees one crore to the
Chief Director (Sugar), Department of
Food and Public Distribution,
Ministry of Consumer Affairs, Food
and Public Distribution within a
period of six months of issue of this
notification failing which the
Industrial Entrepreneur
Memorandum of the concerned
person shall stand de-recognized as
far as provisions of this Order are
concerned."
Learned counsel appearing on behalf of Ojas
submitted that the interpretation placed by the Division
Bench of the Delhi High Court on the expression "existing
sugar mill" in the Press Note No.12 will lead to
discrimination. In this connection, it was submitted that
if in a given case there exists a sugar mill, whose
performance is poor, even then, no new sugar mill
(factory) can be set up within an area of 15 KMs thereof.
According to the learned counsel, this was not the
intention while introducing de-licensing. Learned
counsel further submitted that the impugned judgment
was erroneous in interpreting the said Press Note. It was
urged that in a case, even if there is no existing sugar
mill any number of sugar mills can be set up. According
to the learned counsel, such an interpretation would not
only result in discrimination under Article 14 of the
Constitution of India but it would provide protection to
inefficient existing mills at the cost of the interest of the
farmers in the area. Learned counsel submitted that if
the impugned judgment is upheld then the existing sugar
mills will get full protection. They will be assured of
continuous supply of sugarcane whereas the
entrepreneurs proposing to set up new sugar plants of
higher capacities will not get adequate sugarcane for
their sugar mills. Learned counsel submitted that the
impugned judgment will discourage the new investments
in the sugar industry and the result would be frustration
of the policy of liberalisation. Learned counsel submitted
that such an interpretation will completely desist the
entrepreneur from setting up a sugar mill in a new area.
Learned counsel submitted that the impugned judgment
should not be upheld since it would lead to disastrous
consequences. In this connection, it was submitted that
according to the impugned judgment unless and until the
sugar mill becomes an existing sugar mill the said
entrepreneurs shall have no protection from business
rivals who can set up sugar mills in close proximity
creating difficulties for such entrepreneurs for
procurement of basic raw material. Learned counsel
submitted that under the provisions of the Sugarcane
(Control) Order, 1966 and under the provisions of U.P.
Sugarcane (Regulation of Supply and Purchase) Act,
1953, the Cane Commissioner has been entrusted with
the object of ensuring adequate supply of sugarcane to
the sugar mills. Learned counsel urged that by reason of
the impugned judgment any number of mills can be set
up in close proximity to each other which would make
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 12
the demand for sugarcane much higher than its supply
and in such a situation allocation by the Cane
Commissioner would become very difficult as he would
not be in a position to allocate the sugar mills adequate
cane for the mills. Learned counsel urged that under
Clause 6 of the Sugarcane (Control) Order, 1966 framed
under Section 3 of the Essential Commodities Act, 1955,
the Central Government has been empowered to issue
directions for regulation, distribution and movement of
sugarcane to ensure continuous supply of sugarcane to
sugar mills. In order to avoid unhealthy competition
among the sugar mills and to ensure procurement of
sugar in a systematic manner, the Central Government
has been issuing Policy Directives from time to time in
the form of press note prescribing a minimum distance
between two sugar mills. In this connection, it was
pointed out that a perusal of various press notes issued
by the Central Government from time to time would show
that the minimum radial distance between two sugar
mills has always been retained in the past depending
upon the cane availability. Under the impugned Press
Note No.12, the stipulation was 15 KMs. Therefore,
according to the learned counsel, it was necessary to
retain the minimum radial distance between two sugar
mills so that a given sugar mill having an IEM in the first
instances is assured of adequate supply of raw material.
Learned counsel submitted that reading of various Press
Notes issued by GOI shows that the distance between two
sugar mills has a direct relationship with the availability
of sugarcane. Learned counsel urged that these aspects
have not been taken into account in the impugned
judgment. Learned counsel submitted that the High
Court erred in holding that Press Note No.12 would apply
only in cases where there is a mill in existence (existing
mill). It was submitted that such an interpretation would
lead to chaos. It was submitted that the result of the
impugned judgment would be that the sugar mills would
be allowed to be set up in close proximity leading to
unhealthy competition and starvation of basic raw
material which would make the mills unviable. Learned
counsel submitted even after de-licensing it was
necessary to retain the condition of radial Distance,
namely, sufficient distance between two sugar mills
having nexus with the availability of sugarcane in an
area. In this connection, it was pointed out that
"Distance" has been a relevant Condition for last 20
years. It was urged that this Condition has got to be
retained even after de-licensing. As regards IEMs, it was
submitted that under Notification dated 25.7.91 issued
under Section 29B of the 1951 Act, industries exempted
from de-licensing had to file IEMs. Learned counsel
submitted that the same concept has been continued
even after de-licensing. Learned counsel pointed out that
after de-licensing, industrial licence was not required but
the Condition of filing IEM embodied in Notification dated
25.7.91 has been retained and, therefore, it has legal
sanctity and validity. Learned counsel, therefore, urged
that the Distance Condition should be maintained not
only between existing and proposed mill but also between
two proposed mills. Learned counsel urged that an IEM
gives an entrepreneur a right to take steps for setting up
a sugar mill and without an IEM one cannot proceed to
set up a sugar mill. Therefore, according to the learned
counsel, Part ’A’ of the IEM was equated with LOI and
Part ’B’ of IEM was equated with industrial licence in
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 12
terms of the Press Note No.12 dated 31.8.98. According
to the learned counsel, the High Court has failed to
appreciate that in respect of two sugar mills, proposed to
be set up in a new area, mere filing of IEM was not
sufficient but filing of IEM coupled with the effective
steps was necessary. According to the learned counsel,
IEM plus effective steps to implement such IEM, were the
twin requirements enunciated in the impugned Order
passed by the Chief Director, Sugar, which has been
wrongly set aside by the High Court. Learned counsel
urged that an IEM filed first in point of time, should be
given primacy over IEM filed subsequently subject to the
condition that effective steps have been taken by the First
IEM Holder within reasonable time. Learned Counsel
urged that where effective steps have been taken by the
First IEM Holder, all other IEMs filed thereafter and
falling within 15 KMs from that location should be kept
in suspense and if the First IEM Holder fails to take
effective steps then priority should be given to the Second
IEM Holder and so on and so forth. This, according to
the learned counsel, has not been appreciated by the
Court below. Applying the above tests to the facts of the
present case, learned counsel submitted that Ojas filed
its IEM on 13.5.04 for setting up a sugar mill at
Baisagapur, it had taken effective steps to implement its
IEM and, therefore, according to the learned counsel, the
Subsequent IEM filed by Oudh, should have been
declared as non est by the High Court. For the above
reasons, learned counsel submitted that the impugned
judgment needs to be set aside.
On the other hand, learned counsel appearing on
behalf of Oudh submitted that prior to the Sugarcane
(Control) (Amendment) Order, 2006 dated 10.11.2006,
the only restriction was with regard to Distance as
contained in Press Note No.12 dated 31.8.98. That
Distance was of 15 KMs required to be maintained
between an existing sugar mill and a new sugar mill
(factory). It was not from one IEM to another IEM.
Learned counsel submitted that under Press Note No.12
in order to preclude a new sugar mill from being set up
there has to be an existing sugar mill within 15 KMs of
the proposed sugar mill. It is urged, in Order, for a mill
to be regarded as an existing sugar mill, a mere IEM or
effective steps to implement such IEM were not sufficient
but the mill should have become an existing sugar mill.
Therefore, according to the learned counsel, this view
taken by the Delhi High Court was the correct
interpretation of the law existing before 10.11.06.
Learned counsel urged that the Sugarcane (Control)
(Amendment) Order, 2006 by which Clause 6A to 6E
stood inserted in the Sugarcane (Control) Order, 1966
was not retrospective because it lays down new
conditions such as filing of bank guarantee, filing of
distance certificate and also it lays down effective steps of
implementing of IEM. Therefore, according to the learned
counsel, the said Sugarcane (Control) (Amendment)
Order, 2006, cannot affect the position as it obtained
before 10.11.06. In the alternative, learned counsel
urged that if this Court is of the view that the aforestated
Sugarcane (Control) (Amendment) Order, 2006
constitutes a bar for setting up new sugar mill in the
sense of the First IEM Holder taking effective steps for its
implementation qua the Subsequent IEM Holders then,
according to the learned counsel, one has to decide as to
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 12
what are these effective steps and what would be the
relevant date for determining whether the effective steps
have been undertaken. Learned counsel submitted that
the effective steps to be taken by the IEM Holder are set
out in Explanation 4 to Clause 6A. Learned counsel has
suggested in addition thereto certain other effective steps
which an applicant should take so that unscrupulous
persons are prevented from blocking the sites. These are
\026 purchase of minimum 50 acres of land for the factory
(mill), placement of firm order for purchase of plant and
machinery for the factory, payment of requisite advance
or opening of letter of credit with suppliers, investment of
at least 25 acres on civil work, sanction of term loans
from banks/financial institutions, submission of Project
Report for sugar factory with details of fund resources
and a timeframe within which effective steps should be
taken failing which the IEM would lapse.
India has adopted the policy of economic reforms,
free trade and liberalization in 1991. Government has
taken several steps in that direction. The Licence Raj
has been dismantled in phases. Sugar industry is
accordingly liberalized. It has been de-licensed. The
object being to increase the production of sugar. The
object being to make the sugar industry competitive in
the world. The object being continuous supply of
sugarcane to the entrepreneurs proposing to set up new
sugar plants of viable capacities. The object being
disciplined procurement of sugarcane and sufficient
supply of sugarcane to the mills (factories). This last
object is the basis of Press Note No.12 dated 31.8.98. If
sugar mills are allowed to be set up in close proximity
then the demand of sugarcane will be much higher than
supply and in which event the existing sugar mills will be
starved of the sugarcane and will become unviable
consequently the farmers will also suffer.
Before the High Court one of the submissions made
on behalf of the Oudh was that the Notification dated
11.9.98 under Section 29B(1) of the 1951 Act read with
Press Note No.12 dated 31.8.98, did not provide for a bar
for the Subsequent IEM Holder in the face of the First
IEM Holder taking effective steps within the specified
time-limit. In the impugned judgment (vide para ’65’) the
High Court has stated, while accepting the contention of
Oudh, that the Central Government was free to amend
Press Note No.12 and provide for a bar for Subsequent
IEM Holders from setting up a sugar mill within 15 KMs
of the place where the proposed sugar mill under the
Earlier IEM is proposed to be set up. When High Court
decided the matter there was no such express bar.
However, by way of Sugarcane (Control) (Amendment)
Order, 2006 dated 10.11.06 a bar is introduced vide
Clause 6A to 6E for setting up a new sugar factory (mill)
by a person taking effective steps after filing IEM. In
other words, if the First IEM Holder or the Earlier IEM
Holder takes effective steps to implement its IEM then
the Subsequent IEM Holder cannot proceed with his IEM.
If the First or Earlier IEM Holder completes its Projects
successfully then the Remaining IEMs for that area shall
become non est. They shall, however, remain in
suspense during stipulated period when the Earlier IEM
Holder takes effective steps for implementing its IEM.
Therefore, the very basis of the impugned judgment is
now eliminated. Hence, we are not required to examine
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 12
once again the validity of the said judgment.
Suffice it to state, that the Sugarcane (Control)
(Amendment) Order, 2006 shall apply retrospectively to
all cases, including the present cases in which IEMs are
pending. In this connection, the question which arises
for determination is : firstly, whether the Sugarcane
(Control) (Amendment) Order, 2006 operates
retrospectively and if so whether the effective steps
enumerated in Explanation 4 to Clause 6A are adequate.
In this connection, we have to keep in mind the
conceptual difference between the distance certificate,
the concept of effective steps to be taken by an IEM
Holder and the question of bona fides. Sugarcane
(Control) (Amendment) Order, 2006 inserts Clauses 6A to
6E in Clause 6 of the Sugarcane (Control) Order, 1966.
It retains the concept of "Distance". This concept of
"Distance" has got to be retained for economic reasons.
This concept is based on demand and supply. This
concept has to be retained because the resource, namely,
sugarcane, is limited. Sugarcane is not an unlimited
resource. "Distance" stands for available quantity of
sugarcane to be supplied by the farmer to the sugar mill.
On the other hand, filing of bank guarantee for Rs.1 crore
is only as a matter of proof of bona fides. An
entrepreneur who has genuinely interested in setting up
a sugar mill has to prove his bona fides by giving bank
guarantee of Rs.1 crore. Further, giving of bank
guarantee is also a proof that the businessman has the
financial ability to set up a sugar mill (factory).
Therefore, giving of bank guarantee has nothing to do
with the Distance Certificate. As far as effective steps are
concerned we may point out that apart from the steps
enlisted in the earlier Notification dated 11.9.98 read
with Press Note No.12 dated 31.8.98, the Sugarcane
(Control) (Amendment) Order, 2006 has laid down such
steps like purchase of required land in the name of the
factory (mill), placement of a firm order for purchase of
plant and machinery for the factory, payment of advance
or opening of letter of credit with suppliers,
commencement certificate of civil work and construction
of building, sanction of requisite term loans from the
banks or financial institutions and any other step
prescribed by the Central Government in this regard. In
our view Clauses 6A to 6E have been introduced in
Clause 6 of Sugarcane (Control) Order, 1966. In our view
Clauses 6A to 6E are clarificatory in nature. There are
certain norms mentioned in the Accounting Standards of
Institute of Chartered Accountants for setting up
industries. They may be sugar mills, paper mills, textile
mills etc. When effective steps are enlisted in Sugarcane
(Control) (Amendment) Order, 2006 dated 10.11.06 vide
Explanation 4 to Clause 6A those in-built norms are
made explicit, therefore, Explanation 4 to Clause 6A is
clarificatory. Therefore, it is retrospective. There is one
more reason why we hold that the Sugarcane (Control)
(Amendment) Order, 2006 is retrospective. The Central
Government has taken note of various pending matters
in different courts on the interpretation of Sugarcane
(Control) Order, 1966, Press Note No.12 and the
Notification dated 11.9.98 issued under Section 29B(1) of
the said 1951 Act to put an end to litigations and keeping
in mind the concept of "Distance Certificate" as distinct
from the concept of "effective steps", the Central
Government has issued the Sugarcane (Control)
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 12
(Amendment) Order, 2006. It is to plug the loophole that
the said Order has been issued on 10.11.06. In our view,
therefore, the Sugarcane (Control) (Amendment) Order,
2006 is retrospective. In all pending cases the Central
Government now seeks to put a bar for setting up new
sugar factory (mill) for a limited period during which the
Former or Earlier IEM Holder is required to take effective
steps. The said Order of 2006 is not putting a ban on
setting up of new units. It is only giving a priority in the
matter of setting up of new units. Therefore, the said
2006 Order operates retrospectively. It will not apply to
mills which are already functioning. The said 2006
Order will apply only to cases where IEMs are pending in
disputes in various courts. The said 2006 Order will also
apply after our judgment to those cases which are under
dispute and where milling has not commenced or
permitted to commence. On behalf of Ojas certain
suggested modifications to Explanation 4 in Clause 6A
have been indicated. They are stated hereinabove. They
are worthy of considerations by the Central Government.
It is for the Central Government to incorporate such
modifications as it deems fit keeping in mind the
availability of sugarcane in a given area, the crushing
capacity of the unit, the installed capacity of the plant
and machinery, the nexus with the availability of
sugarcane and the capacity utilization of the mill
(factory). Before concluding on this issue we may
reiterate that raising of resources and application of
resources by a unit is different from the Condition of
Distance. The concept of "Distance" is different from the
concept of "setting up of unit" in the sense that setting
up of a unit is the main concern of the businessman
whereas a concept of "Distance" is an economic concept
which has to be taken into account by the Government
because it is the Government which has to frame
economic policies and which has to take into account
factors such as demand and supply.
I.A.No.2 of 2007 in T.P.(C) No.421
This I.A. pertains to matters pending in Allahabad
High Court (Lucknow Bench). I.A. No.2 of 2007 has been
filed by M/s. Balrampur Chini Mills Ltd. (for short,
’Balrampur’). It is for grant of milling permission to its
factory at Kumbhi, Distt. Lakhimpur Kheri (U.P.), which
is complete. It is submitted on behalf of Balrampur that
the sugarcane crushing season continuous upto 15th May
every year. The factory is ready to start milling. Even a
Cane Reservation Order has been made in its favour.
The factory (mill) is ready. Balrampur has made a huge
investment of Rs.213 crores. According to Balrampur,
the IEM of Ojas is filed for Bhogotipur, only in order to
block the IEM filed by Balrampur. Therefore, they pray
that milling permission should be granted to Balrampur
and that this Court should permit them to obtain and
implement such milling permission. According to
Balrampur, this Court should grant such permission as
it would be in the interest of cane growers, shareholders
and general public. According to Balrampur no prejudice
will be caused to Ojas if they are given such milling
permission. According to Balrampur, they are setting up
two mills in Kumbhi and Guleria and if Ojas is unable to
set up two mills in Bhagotipur and in Bijuwa which are
within 15 KMs. from Kumbhi and Guleria respectively,
then they can still go ahead and set up other mills in
Distt. Lakhimpur and, therefore, no prejudice will be
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 12
caused to Ojas. Balrampur claims to have spent 213
crores at Kumbhi and 152 crores at Guleria. The
Kumbhi unit is complete. It is ready for milling activity.
On behalf of Ojas it has been vehemently argued
that Balrampur took the risk of making investment in the
Kumbhi and Guleria Projects despite pendency of matters
in the High Courts. It is urged that by interim orders
Balrampur was put to notice that they are free to
implement their above two Projects at Kumbhi and
Guleria subject to the outcome of the pending writ
petitions. It is urged that due to deference to the courts,
Ojas did not proceed further for implementation of their
programme whereas Balrampur has proceeded to
implement their Projects at Kumbhi and Guleria at their
own risk and, therefore, they should not be allowed to
take advantage of fait accompli.
We are of the view that out of two Projects at
Kumbhi and Guleria, Balrampur can be given milling
permission for its factory (mill) at Kumbhi. In our
present judgment we have taken the view that the
Sugarcane (Control) (Amendment) Order, 2006 operates
retrospectively. We have also taken the view that in
applying the said 2006 Order there will be a bar on
Subsequent IEM Holders during the specified period
when the Earlier IEM Holder is taking effective steps. At
the same time, we find that in the case of Kumbhi
substantial investment has been made by Balrampur.
Their Projections are better than Units proposed to be set
up by Oudh. Moreover, the sugarcane crushing season
ends on 15th May, 2007, we do not want the cane growers
to suffer. Therefore, we grant milling permission only to
Kumbhi Project. I.A. No.2 of 2007 is made absolute.
However, Guleria Project shall be governed by the
principles laid down in this judgment, as indicated above.
TO SUM UP:
We hold that the Sugarcane (Control) (Amendment)
Order, 2006 imposes a bar on the Subsequent IEM
Holders in the matter of setting up of new sugar mills
(factories) during the stipulated period given to the
Earlier IEM Holders to take effective steps enumerated in
Explanation 4 to Clause 6A of the Sugarcane (Control)
(Amendment) Order, 2006 dated 10.11.2006. We further
hold that the said 2006 Order operates retrospectively.
We have cleared the Kumbhi Project. All other Projects
falling in various writ petitions in the Allahabad High
Court (Lucknow Bench) will be decided by the High Court
in accordance with the principles laid down in this
judgment.
All civil appeals, transfer petitions and interlocutory
applications accordingly stand disposed of with no order
as to costs.