2017 (5) TMI 1509 - SC - Indian Laws

Existence of Raibagh Sahakari Factory - Sugar Factory - whether it is within the radius of 15 km from the Appellant s factory or not? - Clause 6A of the Sugarcane (Control) Amendment Order, 2006 - Restriction on setting up of two sugar factories within the radius of 15 km. - Held 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 - Clauses 6A to 6C and 6E of the Sugarcane (Control) Order mentions the steps which an entrepreneur has to take in an establishment of a sugar factory. These provisions also mention time limit to implement IEM provisions which are made for extension of time as well. Consequences of non-implementation of the provisions are also laid down - Clause 6A also defines what is an existing sugar factory and what is a new factory. This Clause also stipulates the distance requirement and how the minimum distance of 15 km provided therein shall be determined. Distance requirement as provided for under Clause 6A was not applicable in the instant case. It was also emphasised that M/s. Raibag Sahakari had not crushed sugarcane since 2001-2002 i.e. in the last five crushing seasons prior to June 08, 2006, which was also a relevant consideration to hold that distance requirement was inapplicable in this case - the requirement of distance mentioned in the Amendment Order was inserted keeping in mind the benefit of the existing sugar factories. In a situation like this, when such a factory itself gave no objection certificate, thereby waived the requirement, the bonafides of the Appellant cannot be doubted. Appellant is allowed to continue its factory operation subject to the condition that 14 villages which were originally assigned to Respondent No. 1 would be re-allotted to it after taking these villages from the Appellant - appeal allowed.

Issues Involved:
1. Applicability of Clause 6A of the Sugarcane Control Order, 1966 (as amended in 2006) to an entrepreneur with an IEM prior to the amendment.
2. Status of Raibagh Sahakari as an existing sugar factory.
3. Effective steps taken by the appellant under Clause 6A.
4. Validity of extensions granted for commencing commercial production.
5. Locus standi of the writ petitioners.
6. Continuation of the appellant's factory considering subsequent developments.

Issue-wise Detailed Analysis:

1. Applicability of Clause 6A of the Sugarcane Control Order, 1966 (as amended in 2006) to an entrepreneur with an IEM prior to the amendment:
The court examined whether Clause 6A, which mandates a minimum distance of 15 km between sugar factories, applies retrospectively to those who had filed an Industrial Entrepreneur Memorandum (IEM) before the amendment on November 10, 2006. The court noted that the amendment was intended to address the difficulties highlighted in the case of M/s. Ojas Industries Pvt. Ltd., and the concept of minimum distance was given statutory backing. However, the court did not find it necessary to delve deeply into this issue due to the resolution of other critical points.

2. Status of Raibagh Sahakari as an existing sugar factory:
The court clarified that Raibagh Sahakari was not an "existing sugar factory" as it had not carried out crushing operations for the last five sugar seasons before the appellant's IEM acknowledgment on June 08, 2006. The High Court's interpretation that any operation within five years would suffice was deemed incorrect. Given the factory's non-operational status and the subsequent liquidation order, the distance requirement of Clause 6A was inapplicable.

3. Effective steps taken by the appellant under Clause 6A:
The court reviewed the steps taken by the appellant, such as purchasing land, placing orders for machinery, commencing civil construction, and securing term loans. The appellant had also received various permissions from governmental authorities, demonstrating bona fide efforts. Despite the High Court's finding that these were not "effective steps," the Supreme Court considered the cumulative actions and the substantial investments made by the appellant.

4. Validity of extensions granted for commencing commercial production:
The appellant was granted extensions for commencing commercial production, which were contested. The court noted that the appellant had applied for and received extensions from the Union of India, supported by the Government of Karnataka, highlighting the public purpose behind the project. The appellant commenced commercial production within the extended period, demonstrating compliance with the extended timelines.

5. Locus standi of the writ petitioners:
The court questioned the locus standi of the writ petitioners who filed against the appellant's project at advanced stages. The court emphasized that the writ petitions were filed when substantial work had already been completed by the appellant, raising concerns about the petitioners' bona fides.

6. Continuation of the appellant's factory considering subsequent developments:
The court highlighted the significant investments made by the appellant, including an expenditure of approximately ?300 crores, loans of ?237 crores, and operational costs of ?150 crores. The factory provided direct and indirect employment to thousands of people and contributed to electricity production. The court emphasized the public interest in allowing the factory to continue operations, considering the economic impact and the substantial compliance with legal requirements.

Conclusion:
The Supreme Court allowed the appellant's factory to continue operations, setting aside the High Court's directions. The court exercised its power under Article 142 of the Constitution of India, considering the equitable and economic factors. The court also directed the re-allotment of 14 villages originally assigned to Respondent No. 1, ensuring a balanced resolution. Appeals were allowed with no order as to costs.

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