TMI Blog2017 (5) TMI 1509X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - Civil Appeal Nos. 5040, 5041, 5042 and 5043 of 2014 - - - Dated:- 9-5-2017 - SIKRI, A.K. AND SAPRE,ABHAY MANOHAR, JJ. For Appearing Parties: P. Chidambaram, Kavin Gulati, Basava Prabhu S. Patil, Indu Malhotra, Sr. Advs., Ruby Singh Ahuja, Vishal Gehrana, Nakul Gandhi, Manik Karanjawala, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they provided that the basic criteria would be the availability of the cane and the potential for development of sugarcane. These clauses read as follows: Industrial Policy Highlights EXHIBIT No. 12PRESS NOTE No. 16[1991 SERIES] GUIDELINES FOR LICENSING of SUGAR FACTORIES A. A Government of India have reviewed the guidelines for licensing of new and expansion of existing sugar factories issued vide this Ministry's Press Note No. 4[1990 Series] dated 23.7.1990. In supersession of the aforesaid Press Note, Government have formulated the following revised guidelines: 1. New sugar factories will continue to be licensed for a minimum economic capacity of 2500 tones cane crush per day [TCD]. There will not be any maximum limit on such capacity. However, in area specified as industrially backward areas by the Government of India and certified by the Indian Council of Agricultural Research to be agro-climatically suited for development of sugarcane, licensing of new sugar factories in the co-operative and public sectors would be allowed for an initial capacity of 1750 TCD subject to the condition that the units would expand their capacity to 2500 TCD within a period of 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . D. The procedure and guidelines, as given above, are brought to be notice of the entrepreneurs for their information and guidance. No. 10[74]/91-LP New Delhi, the 8th November, 1991 Forwarded to Press Information Bureau for wide publicity to the contents of the above Press Note. SD/- [S. BHAVANI] DEPUTY SECRETARY TO THE GOVERNMENT OF INDIA PRINCIPAL INFORMATION OFFICER, PRESS INFORMATION BUREAU, SHASTRI BHAWAN, NEW DELHI-110 001. This Press Note was amended from time to time by Press Notes dated January 10, 1996, June 15, 1998 and August 31, 1998. 3. Press Note-12 dated August 31, 1998 is of some relevance in the present case. This was the result of liberalization policy of the Central Government. After embarking on liberalization and globalization, in order to ease the doing of business, the Government decided to relax the control over various types of industries. By the aforesaid Notification dated August 31, 1998, the Government exempted persons from taking licenses to set up a sugar factory. This was done in exercise of power contained Under Section 29(b) of the Act subject to the condition that a minimum distance of 15 km would contin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, though these events were taking place simultaneously with the process of setting up of the factory by the Appellant. It would be apposite to first take note of the manner in which the Appellant has set up its factory at the proposed site. 6. As pointed out above, the Appellant filed its IEM on August 08, 2006, supported by the certificate issued by the Cane Development Commissioner that there was no existing sugar factory within the radius of 15 km. Thereafter, on October 20, 2006, the Government of Karnataka granted permission to the Appellant for purchase of agricultural lands for industrial purposes in Raibagh Taluk in village Yadrav. Similar permission was granted Under Section 109(1) of the Karnataka Land Reforms Act, 1961. Similar permission Under Section 109(1) on November 20, 2006 for land admeasuring a total of 38 acres and 11 guntas for setting up a sugar factory in village Yadrav and Saundatti was also granted by the Deputy Commissioner, Belgaum. 7. The Karnataka Udyog Mitra set up under the Karnataka Industrial Facilitation Act, 2002 forwarded a proposal to the Commissioner for Cane Development, for setting up a sugar factory by the Appellant. It was placed be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of M/s. Raibagh had stopped from 2001-2002. (g) The Government of Karnataka allotted 14 villages of Raibagh and six of Doodhganga to the Appellant. (h) The Commissioner, Cane Development/Director of Sugar certified that the distance of the two factories in question from the Appellant's unit was more than 15 kms vide its letter dated August 17, 2007. (i) Appellant was granted permission under the Karnataka Industries (Facilitation) Act, 2002 on November 07, 2007. (j) After obtaining all requisite permissions, various steps were taken by the Appellant such as, purchasing land, placing an order for machinery, placing an order for setting up civil works and applications and approvals for financial assistance. (k) The Government of India accepted the performance guarantee submitted by the Appellant on April 15, 2008 and directed it to file the progress report of the project. (l) The Gram Panchayat Diggiwadi granted and NOC for establishment for factory at village Yadrav. (m) The Gram Panchayat Diggiwadi granted an NOC for establishment of factory at Village Saundatti. (n) The Appellant submitted progress reports to the Chief Director, Sugar for the month ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... econd extension of time to the Appellant till June 07, 2011. It is an admitted case that factory was duly set up and production started before June 07, 2011. The Appellant has also been given the environmental clearance. Government of India even granted licence dated March 24, 2011 for crushing for the season 2010-2011. 10. After recapitulating the aforesaid background leading to the establishment of factory and start of production in the said factory by the Appellant herein, we now advert to the contentious issue of setting up of this factory within 15 km from the sugar factory, Raibagh Sahakari. As pointed out above, on November 06, 1995, M/s. Raibagh Sahakari had issued 'no objection' certificate to the Appellant. In any case, on January 24, 1995, order of liquidation in respect of Raibagh Sahakari was passed by the Government of Karnataka. On September 14, 2006, the Cane Commissioner had written to the Secretary, Government of Karnataka bringing to its notice the fact that in Raibagh Taluk, the total production of sugarcane was 23.32 lakh tonnes as on that date Raibagh Sahakari factory was lying closed. According to the Appellant, because of this reason there was exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aat Dharwad for declaring the IEM dated June 08, 2006 to have lapsed. No interim Order passed in this case. 2. On September 14, 2010: W.P. Nos. 66903-907/2010, W.P. Nos. 66926-35/2010, purportedly filed through some members of M/s. Raibagh Sahakari. No interim order passed in this case also. 3. On October 18, 2010: W.P. No. 66920/2010 and W.P. No. 66972-990/2010 filed by certain members of Doodhganga Krishna Sahakari of Nandi. In this case, an interim order was passed to the effect that all steps taken by the Appellant would abide by the result of the writ petitions. 4. On November 26, 2010: W.P. No. 37143 of 2010 filed as PIL. 13. These writ petitions were finally heard together and have been decided by the High Court vide impugned judgment dated March 29, 2011. The High Court has held that the distance between the factory of the Appellant and Raibagh Sahakari is less than 15 kms and, therefore, the setting up of the factory is in violation of Clause 6A of the Sugarcane (Control) Amendment Order, 2006. As a consequence, the IEM of the Appellant is held to be derecognized. The High Court has also held that extensions dated August 18, 2010 and December 01, 2010 were with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (vii) Najilingappa Sugar Institute issues a report giving details of sugarcane available, crushed and uncrushed till 2011. (viii) While the present appeals were pending, this Court directed the Survey of India to undertake fresh measurements as per the policy of measurements now formulated from January 01, 2008. 16. A perusal of the order of the High Court would reveal that all the official Respondents, viz., the Union of India, the Commissioner for Cane Development and Director for Sugar (Government of Karnataka), the Government of Karnataka as well as the Survey of India had supported the Appellant herein, by filing their detailed responses-cum-statement of objections in the writ petitions filed in the High Court. The Union of India had, inter alia, pointed out that the minimum distance criteria of 15 km as mentioned in Press Note dated August 31, 1998 was directive in nature and not mandatory and in this behalf reference was made to the judgment of Allahabad High Court. At the same time, Delhi High Court had decided otherwise. In view of these developments, expert advice of Department of Legal Affairs was sought which opined that Sugarcane (Control) Order, 1966 may be am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7, granted 'in-principle clearance' for establishment of the sugar factory. It was found that Raibag Sahakari factory was lying close for several years and the order of liquidation has been passed by the State Government. From the year 2001-2002 itself, the crushing activity of the said Raibag Sahakari factory came to be stopped. It was also pointed out that in the year 1995 itself, Raibag Sahakari had conveyed a 'No Objection Certificate' for establishment of factory by the Appellant. 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, Saundatti Village, Raibag Taluk, Order 2007'. The said order admittedly is not called into question by the Appellant nor by Raibag Sahakari Sakkare Karkhane. They have accepted the said order. According to the Cane Commissioner, the allocation of cane area made in favour of M/s. Shivashakti Sugars (the Appellant) is an informed decision. It is a decision made on the basis of relevant materials. It is a decision m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e growth and it will also prevent the farmers from transporting their sugarcane outside the State. There has been under-crushing of sugarcane frown in the entire State as such. In fact, for the year 2007-2008, it was noticed that as against the growth of 340 lakh tonnes of sugarcane, only 270 lakh tones was crushed, thereby leaving about 70 lakh tonnes of sugarcane remaining uncrushed. For the year 2008-2009, it was projected that 90 lakh tonnes 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 ₹ 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. 18. The Appellant, in its counter affidavit filed in the High Court, apart from reiterating the aforesaid facts, submitted that entire action of the Appellant, in this behalf, was bonafide and it had invested substantial amounts for the establishment of the factory. Therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sugar Mills and Raibag Sugar Mills within 15 km from the sugar factory of the Appellant; the Survey of India had not determined the distance by conducting the measurements independently; Clause 6A of the Sugarcane Control Order was mandatory and retrospective in nature and, therefore, was applicable in the case of the Appellant as well. In the process, the High Court also held that Raibag Sugar Factory was an existing factory within the meaning of Clause 6A of the Sugarcane Control Order 2006. 22. The Appellant has challenged the aforesaid findings of the High Court. In the first instance, it is argued that interpretation of Clause 6A of the Sugarcane Control Order by this Court in M/s. Ojas Industries case holding it to be retrospective, is per incuriam. It is also argued that, in any case, since M/s. Raibag Sahakari Sakkare Karkhane was not an existing sugar factory at the relevant time, rigours of Clause 6A was not applicable in the case of the Appellant as the question of distance did not arise. It was also argued that the findings of the High Court that the Appellant did not take effective steps as per explanation to Clause 6A was clearly erroneous and, therefore, it resul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inuing to crush sugarcane since the year 2011, the Appellant's factory may be permitted to continue, in the interest of justice, in the facts and circumstances of the present case? 23. We feel that it would be more appropriate to first deal with the issues (b) and (g), inasmuch as our answer thereto would reveal that there is no need to traverse through the other issues at all. 24. Before we touch upon the discussion on these issues, let us reproduce the provisions of Clauses 6A to 6C and 6E of the Sugarcane (Control) Order which were introduced by way of an amendment in the year 2006. These 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, 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. It was submitted that there was a clinching evidence to prove the aforesaid facts inasmuch as this has been judicially acknowledged in the orders of the High Court itself while dealing with the challenge to the action of the State Government in inviting tenders for giving lease to M/s. Raibag Sahakari and while deciding challenge to the grant of the said lease in favour of Respondent No. 1. 27. We may point out at this stage that the aforesaid fact is not in dispute. There cannot be any quarrel about the same having regard to plethora of evidence produced in support of this submission which has already been recorded above. The question is as to whether M/s. Raibagh Sahakari would be treated as 'existing sugar factory' within the meaning of Clause 6A of the Sugarcane Control Order. It is the case of the Appellant that Cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f time. No doubt, subsequently the State Government decided to revive this factory and steps in this behalf were taken in the year 2008. However, much before that IEM of the Appellant was got acknowledged on June 08, 2006. As on that date, there was no 'existing' sugar factory within the meaning of Clause 6A of the Sugarcane Control Order. Therefore, the requirement of distance as prescribed in Clause 6A would be inapplicable. 30. Insofar as M/s. Doodhganga Sahakari factory is concerned, two aspects need to be stressed upon. First, as per the certificate of Survey of India given on June 05, 2006, distance between the said factory and the then proposed factory of the Appellant is shown to be 15 km. Secondly, M/s. Doodhganga Sahakari had given their no objection to the setting up of the factory by the Appellant on the basis of which matter was processed further. 31. We have to keep in mind that 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions (besides the principles of natural justice) governing the disciplinary enquiries involving government servants and employees of statutory corporations, the principles adumbrated therein are of general application. It is necessary to keep these considerations in mind while deciding whether any interference is called for by the court --whether Under Article 226 or in a suit. The function of the court is not a mechanical one. It is always a considered course of action. 32. Another aspect which is to be borne in mind is that the purpose of distance requirement is that there is sufficient availability of sugarcane in the area so that it could easily cater to all the sugar factories. It is not disputed that Appellant's factory has not adversely affected the utilisation of crushing capacity of either M/s. Doodhganga Sahakari factory or M/s. Raibagh Sahakari factory. It was pointed out by the learned Counsel for the Appellant during arguments, which fact was not denied by either side, that for last three years, M/s. Doodhganga Sahakari factory had crushed more sugarcane than their target. 33. We, therefore, answer this issue by holding that in the facts of the present ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... indirect employment of approximately 7150 persons during each crushing season is facilitated by the running of the Appellant's factory. (ix) The Appellant has also set up a co-generation plant for production of electricity which was initially 15 megawatt and, at present, is giving supply of 37 megawatt electricity. (x) There is ample sugarcane supply in the State of Karnataka and, in particular, in Raibagh region and, therefore, there is no adverse effect on the operation of any other sugar mills including M/s. Raibagh Sahakari and M/s. Doodhganga Sahakari 35. When we keep in mind all the aforesaid factors cumulatively, we see that no purpose is going to be served in getting the unit of the Appellant closed. On the contrary, public purpose demands that the Appellant's factory remain in operation and continue to function. 36. We have already highlighted the factors which weigh in favour of continuing the operations of the Appellant's factory. Apart from equitable considerations on the side of the Appellant, there are certain economic factors as well which tilt the balance totally in favour of the Appellant herein. These include expenditure of approximately &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing. Exploiting advances in the economics of nonmarket behavior, economic analysis of law has expanded far beyond its original focus on antitrust, taxation, public utility Regulation, corporate finance, and other areas of explicitly economic Regulation. (And within that domain, it has expanded to include such fields as property and contract law). The new economic analysis of law embraces such nonmarket, or quasi-nonmarket, fields of law as tort law, family law, criminal law, free speech, procedure, legislation, public international law, the law of intellectual property, the Rules governing the trial and appellate process, environmental law, the administrative process, the Regulation of health and safety, the laws forbidding discrimination in employment, and social norms viewed as a source of, an obstacle to, and a substitute for formal law. Posner also mentioned that this interface between Law and Economics might grandly be called 'Economic Theory of Law', which is built on a pioneering Article by Ronald Coase {R.H. Coase, The Problem of Social Cost , 3 Journal of Law and Economics 1 (1960)}: The Coase Theorem holds that where market transaction costs are ze ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rations specific provisions of law are to be ignored. First duty of the Court is to decide the case by applying the statutory provisions. However, on the application of law and while interpreting a particular provision, economic impact/effect of a decision, wherever warranted, has to be kept in mind. Likewise, in a situation where two views are possible or wherever there is a discretion given to the Court by law, the Court needs to lean in favour of a particular view which subserves the economic interest of the nation. Conversely, the Court needs to avoid that particular outcome which has a potential to create an adverse affect on employment, growth of infrastructure or economy or the revenue of the State. It is in this context that economic analysis of the impact of the decision becomes imperative In the jurisprudence of the Economic Approach to Law, there are various theories propounded by the jurists, e.g., The Positive Theory or Normative Theory etc. However, here, we are limiting the discussion to that facet which relates to economic impact of a judicial decision . At times, this Court has laid emphasis on this aspect, albeit in other context. For example, in Raunaq Internati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the court may ultimately result in delay in the execution of the project. The obvious consequence of such delay is price escalation. If any retendering is prescribed, cost of the project can escalate substantially. What is more important is that ultimately the public would have to pay a much higher price in the form of delay in the commissioning of the project and the consequent delay in the contemplated public service becoming available to the public. If it is a power project which is thus delayed, the public may lose substantially because of shortage in electricity supply and the consequent obstruction in industrial development. If the project is for the construction of a road or an irrigation canal, the delay in transportation facility becoming available or the delay in water supply for agriculture being available, can be a substantial setback to the country's economic development. Where the decision has been taken bona fide and a choice has been exercised on legitimate considerations and not arbitrarily, there is no reason why the court should entertain a petition Under Article 226. xx xx xx 18. The same considerations must weigh with the court when interim orders are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of law on ad hoc basis. Time has come to consider the inter-discipline between law and economics as a profound movement on sustainable basis. These are the additional relevant considerations which have weighed in our mind in adopting a particular course of action in the instant case. 40. Even if we find some technical violation, the aforesaid factors demand this Court to exercise its power Under Article 142 of the Constitution of India. This Court would be inclined to do so in the instant case which is a fit case for exercise of such powers keeping in view the equitable considerations and moulding the relief. 41. The learned senior Counsel for the Appellant had made a very fair suggestion that even if there is a shortage of sugarcane (though it is not so), sugarcane from the 14 villages originally assigned to Respondent No. 1 and now with the Appellant can be re-allotted to Respondent No. 1. Having regard to this submission, we dispose of these appeals by setting aside the directions contained in the judgment of the High Court and allowing the Appellant's factory to continue its operation subject to the condition that 14 villages which were originally assigned to Respon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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