SWAMI SAMARTH SUGARS AND AGRO INDUSTRIES LTD. versus LOKNETE MARUTRAO GHULE PATIL DNYANESHWAR SAHAKARI SAKHAR KARKHANA LTD & ORS. on 13 July 2022

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SUPREME COURT REPORTS

[2022] 17 S.C.R.

ASWAMI SAMARTH SUGARS AND AGRO INDUSTRIES LTD.

v.

LOKNETE MARUTRAO GHULE PATIL DNYANESHWARSAHAKARI SAKHAR KARKHANA LTD & ORS.

B(Civil Appeal Nos. 4021of 2022)

JULY 13, 2022

[HEMANT GUPTA AND V. RAMASUBRAMANIAN, JJ.]

Essential Commodities Act, 1955:s. 3 – Sugarcane(Control)Order, 1966 – clause 6A, 6C & 6D –Restriction on setting two sugarCfactories – Time limit for implementing Industrial EntrepreneurMemorandum (IEM) – In 2010, the appellant applied for IEM whichwas acknowledged by Govt. of India on the basis of a certificateregarding aerial distance between the existing sugar factory(Respondent no. 1) set up in 1974 and the nearby proposed sugarDfactory –Writ petitions were filed challenging the grant of IEM tothe Appellant, one on the ground of aerial distance of proposedsugar factory and existing factory was more than 15 kms and thatthe proposed sugar factory falls within the radius of 500 metersfrom the bank of river thereby falling under no development zone –High Court held that the appellant is required to comply with allElaws including the anti-pollution, environmental protection andecology; and that the issue of aerial distance certificate cannot bereopened again–Subsequently the State of Maharashtra directedthat in terms of proviso to Clause 6A of the Control Order, 1966 nonew sugar factory would be set up within the radius of 25 kms ofFany existing sugar factory or any other new factory– Thereafter,the time limit for implementing industrial entrepreneur memorandumwas amended – Appellant then sought NOC in view of the order ofthe High Court which was not granted by State authorities –Consequently, the appellant applied for extension of time andchange of location due to earlier location being no developmentGzone and was accepted – Writ petition by the existing sugar factorychallenging grant of extension and change of location– Governmentallowed the extension a couple to times till 2020– Another writpetition filed by the existing sugar factory challenging grant ofextension and change of location – High Court held that theHappellant had not taken any effective steps within the period of two

years from the date of the acknowledgement of EMI; that the IEMstood de-recognized before the Sugar Control Order was amendedon 26.08.2016 which extended the period of implementation;thatextensions were granted in violation to the provisions of the Rulesand the Statute; and that as per the amendment, the new sugarfactory had to be at a distance of not less than 25 kms–Issue aroseas regards, whether in the absence of any interim order against theappellant in the first round of litigation, the period during whichwrit petitions were pending are liable to be excluded; whether theState/ Central Government was justified in excluding such periodwhile granting extension of IEM; whether the lis initiated againstthe appellant is a sufficient reason to exclude the period spent insuch litigation and was a reasonable ground for the State/CentralGovernment to extend IEM; whether the amended Control Order interms of proviso to Clause 6C as amended by the State ofMaharashtra on 03.12.2011 would be applicable when the HighCourt in the earlier writ petition has held that the issue of AerialDistance Certificate cannot be reopened at the instance of theappellant or any other party again, and whether the IEM standslapsed on the failure on the part of entrepreneur to set up the sugarfactory and start production within the time specified in Clause 6Cor such lapsing would be only after an order in terms of Clause 6Dof the Control Order is passed – Held: Latin maxim ‘Actus CuriaeNeminem Gravabit’, states that the act of the Court will not prejudiceanyone - During the whole litigation history, the appellant was atthe receiving end of the writ petitions, thus, the period spent in suchlis cannot be used against him - Though there was no interim orderpassed in the writ petitions, such petitions created a cloud on theright of the appellant to set up a sugar factory at the locationearmarked and to commence commercial production - Writ petitionsremained pending for a period of four years, the period spent indefending such writ petitions was validly taken into considerationby the State/Central Government to grant extension of time limitfixed in the Control Order - Extensions were given when the secondround of litigation was pending before the High Court due to whichthe appellant was not able to take effective steps- Decision of thecompetent authority to grant extensions of time was a proper exerciseof the powers- the subsequent amendment in the Control Order wouldnot have any application towards the IEM already issued–Unless AB

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Athe performance guarantee is forfeited, there is no lapsing of IEM–Twin conditions have to be fulfilled, (i) failure to set up plant andto commence production and then (ii) the forfeiture of theperformance guarantee – Second will not arise unless the first issatisfied and the second step cannot be undertaken, withoutcomplying with an opportunity of personal hearing in terms ofBClause 6D of the Control Order – Unless the necessaryconsequences of de- recognition of IEM are undertaken, there isno automatic lapsing of IEM – Appellant had furnished aperformance guarantee of Rs. 1 crore, however, no steps taken eitherby State Government or by the Central Government to forfeit suchCperformance guarantee inasmuch as not even a show cause noticewas issued – Thus, a conclusion cannot be drawn that the IEM isdeemed to be lapsed automatically only on account of lapsing oftime –Order passed by the High Court, is unsustainable and is setaside.DAllowing the appeal, the Court

Conclusion

HELD: 1.1. The latin maxim ‘Actus Curiae NeminemGravabit’ i.e., the act of the Court will not prejudice anyone, iswell known, but the applicability of the same to the facts of thepresent circumstances need to be examined. The appellant wasEjustified in not taking any effective steps pending such lis, ascontemplated under Explanation 4 to Clause 6A of the ControlOrder. The arial distance is one of the foremost requirementsfor a valid IEM. Injury, if any, caused by the act of the Court shallbe undone and the gain which the party would have earned, unlessit was interdicted by the order of the Court would be restored toFor conferred on the party by suitably commanding the party liableto do so. The Court noticed that the litigation may turn into afruitful industry. Though litigation is not gambling yet there is anelement of chance in every litigation. Unscrupulous litigants mayfeel encouraged to approach the courts, persuading the court toGpass interlocutory orders favourable to them by making out aprima facie case when the issues are yet to be heard anddetermined on merits and if the concept of restitution is excludedfrom application. [Para 23][74-G-H; 75-A-D]

1.2. The appellant was at the receiving end of the writHpetitions filed and was at the receiving end of such litigation and the period spent in such lis cannot be used against the appellant[Para 24][76-F]

1.3. Though there was no interim order passed in the writpetitions, such petitions created a cloud on the right of theappellant to set up a sugar factory at the location earmarked andto commence commercial production. The writ petitions remainedpending for a period of four years. Therefore, the period spent indefending such writ petitions was validly taken into considerationby the State/Central Government to grant extension of time limitfixed in the Control Order. Government of India grantedextension on 14.11.2018 when the Control Order as amended on12.08.2018 was operative and effective. The amendments carriedout in Control Order were for the benefit of the entrepreneurs,therefore, the Control Order as it existed on the date of theextension would be applicable. It is in terms of such Clause thatthe appellant was called upon to furnish additional bank guaranteeof Rs. 50 Lakhs. Hence, the power exercised by the CentralGovernment is in terms of the statutory Control Order asamended on 14.11.2018. [Para 26][78-B-D]

1.4 The Aerial Distance Certificate was categoricallydeclared to be not open to challenge even though the State hadamended the Control Order on 03.11.2011 to increase thedistance between the existing sugar factory and the new factorywas increased to 25 kilometers. Even though the Control Orderwas already amended by the State, but the High Court held thatthe aerial distance would be as applicable on the date of IEMacknowledged by the Central Government. It is to be noted thatthere is no challenge to the order passed by the High Court inthe first round of the litigation. Therefore, even the High Courtin the second round of litigation was not within its jurisdiction tohold that the amended distance regulations would be applicable.[Para 27][78-G-H; 79-A]

1.5. The language of the Control Order has been amendedtime and again with a view to enable the competent authority togrant extension of time due to “unforeseen circumstances”. TheControl Order amended on 12.08.2018 contemplates more thanone unforeseen circumstance beyond the control of the person ABC

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Aconcerned. It also empowers the competent authority to extendthe validity of IEM where the delay is due to any court caserelating to land use, environment or “such other reason”. Sub-clause (c) of Clause 6C empowers the competent authority togrant further extension for a period of not exceeding a year at atime subject to furnishing of a bank guarantee. Therefore, theBobjective and purpose of such amended Control Order is that asugar mill should commence production by excluding the periodspent in the court cases. Though the appellant was the defenderof the IEM granted and there was no stay in the first round oflitigation, but the extension granted would fall under the categoryCof “such other reason”. In the first round of litigation, challengewas to the Aerial Distance Certificate, the writ petitioners havefailed in such challenge but the High Court rightly interdictedthat the appellant is required to comply with the anti- pollutionlaws in the field and the laws relating to preservation of ecologyand environment. Such order led to the appellant looking forDalternative location in view of the denial of no-objection certificateby Godawari Marathwada Irrigation Development Corporation.Therefore, the period spent in litigation for the years 2010-2014has been rightly excluded by the competent authority. [Para29][79-D-H; 80-A-B]

E1.6. In the absence of any finding by the High Court to theeffect that the decision of the Central Government is so arbitrary,irrational or unjust. The High Court has gravely erred in takinginto consideration that appellant was remiss in not implementingIEM during the pendency of the writ petitions in the first round Fof litigation. [Para 31][82-D-E]

1.7. The scheme of the Control Order shows that once IEMis granted, the timeline has to be determined keeping in viewthe date of the issuance of the IEM. Therefore, subsequentamendment would be applicable in respect of new sugar factoryGwhich may be proposed to be set up. IEM fixes the timeline fromthe date of issuance of the same and the subsequent amendmentin the Control Order would not have any application towards theIEM already issued.[Para 32][82-F-G; 83-A]

1.8. All the extensions were granted when the matter wasHstill pending before the High Court and were subject to the outcome of the writ petitions. Therefore, the objections regardingfrequent grant of extension of IEM are not of much substance.[Para 40][86-A-B]

1.9. The Decision of the competent authority to grantextension of time is proper exercise of the powers conferred onit and cannot be said to be illegal, irrational or suffering fromprocedural impropriety [Para 41][86-C]

1.10. Though Clause 6C as applicable on 10.11.2006 as wellas on 24.08.2016 and 12.08.2018 contemplates the IEM shallstand de- recognised and the performance guarantee shall beforfeited, the performance guarantee is to be forfeited in termsof Clause 6D after providing the reasonable opportunity of beingheard. The twin conditions have to be fulfilled- (i) failure to setup plant and to commence production and then (ii) the forfeitureof the performance guarantee. Second will not arise unless thefirst is satisfied and the second step cannot be undertaken, withoutcomplying with an opportunity of personal hearing in terms ofClause 6D of the Control Order. Unless the performanceguarantee is forfeited, there is no lapsing of IEM. Thus, unlessthe necessary consequences of de- recognition of IEM areundertaken, there is no automatic lapsing of IEM. Such is thelanguage in the subsequent amended Control Orders as well.The appellant had furnished a performance guarantee of Rs. 1crore, however no steps were taken either by the StateGovernment or by the Central Government to forfeit suchperformance guarantee inasmuch as not even a show cause noticewas issued. Thus, a conclusion cannot be drawn that the IEM isdeemed to be lapsed automatically only on account of lapsing oftime. [Para 44][86-G-H; 87-A-D]

1.11. The appellant cannot be denied the benefit of settingup of a sugar mill only on the basis of resistance from thecompetitor, who had only financial interest in mind. In case of acompetition, it is the consumer (farmer) who is the beneficiary.In the present case, the farmers are not getting the advantage ofcompetition which could fetch them timely payment and betterservices [Para 45][87-G]

ABCD

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A1.12. The reasoning given by the Central Government thatin order to avoid unhealthy competition, the licensing under theIndustries (Development and Regulation) Act, 1951 was doneaway with on 31.08.1998. Unhealthy competition has two majoraspects- one relating to the existing and new sugar factory, andsecond in the context of the farmers. On account of competitionBbetween the existing and new sugar factory, it would be thefarmers who will be the beneficiary as they would have an optionto select the sugar mill which provides better service in themanner of payment of price. Keeping in view therecommendations of the Rangarajan Committee and the fact thatCthe Central Government has exercised its jurisdiction to grantextension in time, the ultimate beneficiary would be the farmerand not the existing or the new sugar factory. [Para 50][91-D-E]1.13. The order of the High Court was held to beunsustainable. The writ petitions are dismissed. The period spentDin the second round of litigation shall also be excluded whiledetermining the period during which the plant had to be set upand to commence commercial production. [Para 51][91-F]

South Eastern Coalfields Ltd. v. State of M.P. and Others(2003) 8 SCC 648 : [2003] 4 Suppl. SCR 651,Beg RajESingh v. State of U.P. and Others (2003) 1 SCC 726 :[2002 ] 5 Suppl. SCR 530 – relied on.

M/s Ojas Industries (P) Ltd v. M/s Oudh Sugar MillsLtd. AIR 2007 SC 1619 : [2007] 4 SCR 661,TataCellular v. Union of India(1994) 6 SCC 651: [1994] 2FSuppl. SCR 122, Babaji Kondaji Garad v. NasikMerchants Co-operative Bank Ltd., Nasik and Others(1984) 2 SCC 50 : [1984 ] 1 SCR 767,DhananjayaReddy v. State of Karnataka(2001) 4 SCC 9 : [2001] 2SCR 399 – referred to.

Case Law Reference

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[2007] 4 SCR 661referred toPara 18& 33[2003] 4 Suppl. SCR 651 relied onPara 23,28 & 29[2002] 5 Suppl. SCR 530 referred toPara 25

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SWAMI SAMARTH SUGARS AND AGRO INDUSTRIES v. LOKNETE M. G.P. D. SAHAKARI SAKHAR KARKHANA

CIVIL APPELLATE JURISDICTION : Civil Appeal No.4021of 2022.

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From the Judgment and Order dated 23.07.2021 of the High Courtof Judicature at Bombay Bench at Aurangabad in Writ Petition No.6754of 2020.

With

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Civil appeal nos.4022 and 4023 of 2022.

Mukul Rohatgi, C. A. Sundaram, Anil Y. Sakhare, Harish Salve,P. Chidambaram, Ms. Sonia Mathur, R. N. Dhorde, Sr. Advs., DilipAnnasaheb Taur, Nikhil Rohatgi, Rohan S. Mirpury, Shashank Khurana,Ms. Manjeet Kirpal, Nand Kumar Deshmukh, M. Y. Deshmukh,Adweetiya, Durga Dutt, Harish Pandey, Shailesh Madiyal, SharathNambiar, Vinayak Sharma, Mohd. Akhil, P. V. Yogeswaran, AmrishKumar, Raj Bahadur Yadav, Manan Verma, Ms. Shubhangi Tuli, Ms.Tanya Agarwal, Ms. Mridula Singh Chauhan, Hitesh Kumar Sharma, S.K. Rajora, Akhileshwar Jha, E. Vinay Kumar, Ms. Manju Jetley,Anshuman Ashok, Rahul Chitnis, Sachin Patil, Aaditya P. Pande, GeoJoseph, Ms. Shwetal Shepal, Advs. for the appearing parties.

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The Judgment of the Court was delivered by HEMANT GUPTA, J.

1. The present appeals arise out of the three writ petitions whichwere decided by a common order dated 23.07.2021. Two of the writpetitions were filed by the respondent herein – Loknete Marutrao GhulePatil Dnyaneshwar Sahakari Sakhar Karkhana Ltd.[1], whereas the thirdone was filed by the members of the existing sugar factory. Since theissue raised in all the three writ petitions was common, therefore, thesame was decided by the High Court by a common order.

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2. In the writ petitions, direction was sought that the IndustrialEntrepreneur Memorandum[2] dated 8.9.2010 be de-recognised/cancelledin view of the provisions of Clause 6C of the Sugarcane (Control) Order, 1 Existing Sugar Factory H

2 For short, ‘IEM’

A1966[3]. The challenge was inter alia on the ground that the time limit fora new factory to be set up was 2 years and to commence productionwas within 4 years (2+4), but the appellant failed to take any effectivesteps to set up and commence production within such time framecontemplated by the Control Order. Another ground was that the Stateof Maharashtra had issued a circular on 03.12.2011 under Clause 6A ofBthe Control Order that no sugar factory shall be set up within the radiusof 25 kms of any existing sugar factory or any other new factorysubstituting the provisions that the minimum distance was for 15 kmsexisting on the date of grant of IEM, therefore, the proposed sugar factorydoes not meet the norm of 25 kilometers. Finally, it was contended thatCin the absence of steps for setting up of a sugar factory andcommencement of the commercial production, the IEM stands de-recognised by operation of the provision of the Control Order. Therefore,the grant of extensions to set up the sugar factory issued on 14.11.2018followed by another extension of time and to change the location on17.10.2019 by the Central Government was contrary to the Control Order.D

3. The brief facts leading to the present appeals are that the existingsugar factory was set up in the year 1974, claiming to have more than15000 members with crushing capacity as 1250 M.T. in the year 1974-75 which was increased to 7000 M.T. per day in the year 2014-15. Thesaid sugar factory had also set up a Distillery Plant, Co-generation Plant,EEthanol Plant and enhanced its crushing capacity of 6000 M.T. per dayafter a fresh IEM was issued on 01.05.2012.

4. The appellant applied for IEM on 08.09.2010, the same wasacknowledged by Government of India after Commissioner of Sugar,Maharashtra issued a certificate regarding aerial distance between theexisting sugar factory and the nearby proposed sugar factory in RamdohF(Warkhed), Tehsil- Newasa, District- Ahmednagar. It was reported thataerial distance between the sites of other sugar factories adjacent to theproposed sugar factory at Ramdoh (Warkhed), Tehsil- Newasa, District-Ahmednagar was more than 15 kms. On the basis of such certificate,IEM was acknowledged after the appellant furnished a bank guaranteeGof the sum of Rs. 1 crore which was to remain in force up to 04.04.2016.

5. However, a writ petition was filed soon thereafter on 23.09.2010,challenging the IEM granted to the appellant on the ground of aerialdistance of proposed sugar factory and existing sugar factory. Anotherwrit petition was filed on 17.03.2011 challenging the IEM on the groundH3 For short, ‘Control Order’

that the proposed sugar factory was not complying with the provisionsof Environmental Protection Act, 1986. Both the writ petitions weredecided on 27.01.2014 wherein the High Court passed the followingorder:

“4. Bare perusal thereof indicates that no new sugar factory shallbe set up within the radius of 15 kms of any existing sugar factoryor another new sugar factory in a State or two or more States.The proviso has also been inserted in the Control Order to ensurethat the restriction on setting up of two sugar factories within theradius of 15 kms is complied with.

5. The petitioners have pointed out, and in all fairness, that acertificate has been issued by the Commissioner of Sugar,Maharashtra State, Pune pointing out that the aerial distancebetween the sites of other sugar factories, adjacent to respondentNo.8 is more than 15 kms.

6. This certificate, dated 17.08.2010, therefore, is in compliancewith the requirement in Clause 6-A reproduced above. That is theonly aspect with which this Court is concerned so far as thepetitioners in this petition are concerned.

7. Now, the Writ petitioners and the PIL petitioners are raisinganother issue, namely, the proposed sugar factory not complyingwith the provisions of the Environmental Protection Act, 1986and it would indicate as to how the same falls within the radius of500 meters from the bank of river and therefore, it is falling withinno development zone and hence it cannot be set up.

8. After hearing the petitioners on this point, merely becauseClause 6-A has been complied with, it does not mean that thesugar factory or the proposed sugar factory have not to complywith other laws. They are obliged to comply with the anti-pollutionlaws in the field and the laws relating to preservation of ecologyand environment as well. It is only thereafter and other laws andRules in the field being complied with that any question arises ofthese sugar factories becoming functional. For the present, thestand taken in the affidavit by the authorities need not be probedfurther. In the event, respondent No.6 carries out constructionand development, then needless to clarify that the said respondentwill have to comply with all laws including the anti-pollution,environmental protection and ecology.

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A9. In such circumstances, the petitions need not be kept pending.They are disposed of. However, the issue of aerial distancecertificate cannot be reopened at the instance of the petitioner orany other party again.”

6. The sugar industry was deleted from the list of industriesBrequiring compulsory licensing under the provisions of the Industries(Development and Regulation) Act, 1951 on 31.08.1998. However, thecondition of minimum distance of 15 kms as provided by the ControlOrder issued under Section 3 of the Essential Commodities Act, 1955[4]was ordered to continue in order to avoid unhealthy competition amongstsugar factories.C

7. The Control Order was issued in exercise of the powersconferred under Section 3 of the 1955 Act. Some of the relevantconditions, as amended on 10.11.2006, read thus:

“6A. Restriction on setting of two sugar factories with inthe radius of 15 kms:-D

Notwithstanding anything contained in Clause 6, no newsugar factory shall be set up within the radius of 15 kms of anyexisting sugar factory or another new sugar factory in a State ortwo or more States:

Provided that State Government may with the prior approvalof the Central Government where it considers necessary andexpedient on public interest notify such minimum distance higherthan 15 kms or different minimum distances not less than 15 kmsfor different regions in their respective States.

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Explanation 4: The effective steps shall mean the following stepstaken by the concerned person to implement than IndustrialEntrepreneur Memorandum for setting up of sugar factory:- (a) Purchase of required land in the name of the factory.

G(b) Placement of firm order for purchase of plant and machineryfor the factory and payment requisite advanced and opening ofirrevocable letter of credit with suppliers.

€ Commencement of civil works and construction of building forthe factory.H4 1955 Act (d) Sanction of requisite terms loans from bank or financialinstitutio€(e) Any others steps prescribed by the CentralGovernment in this regard through a notification.

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6C. Time limit to implement Industrial EntrepreneurMemorandum The stipulated time for taking effective steps shall be two yearsand commercial production shall commence within four years witheffect from the date of filing of Industrial EntrepreneurMemorandum with the Central Government, failing which theIndustrial Entrepreneur Memorandum shall stand derecognizedas far as provisions of this Order are concerned and theperformance guarantee shall be forfeited.

Provided that the Chief Director (Sugar), Department of Food &Public Distribution, Ministry of Consumer Affairs, Food & PublicDistribution, on the recommendation of the concerned StateGovernment, may give extension of one year not exceeding sixmonths at a time, for implementing the Industrial EntrepreneurMemorandum and commencement of commercial productionthereof.

-6D. Consequences of nonimplementation of the provisionlaid down in clauses 6B and 6C:- If an Industrial Entrepreneur Memorandum remainsunimplemented within the time specified in clause 6C, theperformance guarantee furnished for its implementation shall beforfeited after giving the concerned person a reasonableopportunity of being heard.”

8. The Government of Maharashtra, after approval of the CentralGovernment, directed on 03.12.2011 that in terms of proviso to Clause6A, no new sugar factory shall be set up within the radius of 25 kms ofany existing sugar factory or any other new factory.

9. On 24.08.2016, the Control Order was amended, when Clause6C was substituted and a proviso was inserted after Clause 6D. Suchamendment reads thus:

“6C. Time limit for implementing Industrial EntrepreneurMemorandum- The stipulated time for taking effective steps A

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shall be three years and commercial production shall commencewithin five years with effect from the date of filing the IndustrialEntrepreneur Memorandum with the Central Government, failingwhich the Industrial Entrepreneur Memorandum shall stand de-recognised as far as provisions of this Order are concerned andthe performance guarantee shall be forfeited:

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Provided that the Chief Director (Sugar), Department ofFood and Public Distribution, Ministry of Consumer Affairs, Foodand Public Distribution may, after the expiry of the aforesaid period,give extension of maximum two years, not exceeding more than ayear at a time, in cases involving delay due to any unforeseencircumstances beyond control, such as natural calamities, droughtor non-availability of sugarcane (raw material) during off seasonin a year wherein the extended validity period terminates, non-financing of sugar sectors, stay on permission for land use by thecourts due to environmental or other reason. In all such casesextension shall be granted in consultation with respective StateGovernments, if necessary, either for taking effective steps or forcommencement of sugar production.

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6D.

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Provided that the performance guarantee shall be returned if-

(i) the commercial production is commenced within thestipulated period of seven years including two years ofextension; F

(ii) the commercial production is not commenced even afterseven years for reasons not attributable to the project proponentand the same is fully established on merit and be recorded inwriting;

(iii) the project proponent suomotu, opts to forego its IndustrialGEntrepreneur Memorandum within two years from the date ofits filing and requests for return of performance guarantee withdue justification.”

10. The Control Order was subsequently amended on 12.08.2018,again substituting Clause 6C which reads as thus:

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“6C. Time limit for implementing Industrial EntrepreneurMemorandum-

(1) The stipulated time for taking effective steps as specified inexplanation 4 to clause 6A shall be three years and the commercialproduction of sugar shall commence within five years from thedate of filing of the industrial entrepreneur memorandum with theCentral Government under sub-clause (1) of clause 6B failingwhich the Industrial Entrepreneur Memorandum shall standDefendant-recognized as provided in sub-clause (2) thereof, andthe performance guarantee furnished thereunder shall be forfeited:

(2) The time limit specified under sub-clause (1) may be extendedin the following manner, namely:- (a) Where the delay is due to any unforeseen circumstances beyondthe control of the person concerned such as natural calamitiesincluding drought, non-availability of sugarcane (raw material)during off season in the year in which the stipulated periodterminates and non-financing of sugar sectors, the Chief Director(Sugar), Department of Food and Public Distribution, Ministry ofConsumer Affairs, Food and Public Distribution may, after theexpiry of five years’ period stipulated under sub-clause (1) extendthe period stipulated under sub-clause (1) for a further period oftwo years, not exceeding more than a year at a time; Provided that such extension may be granted for takingeffective steps or for the commencement of commercial productionof sugar, in consultation with the State Government concerned, ifconsidered necessary.

Provided further that in case the commercial productiondoes not commence within such extended period, the bankguarantee furnished under sub-clause (2) of clause 6B shall beforfeited;

(b) Where the delay is due to any court case relating to land use,environment or such other reason, that may have arisen withinfive year from the date of filing of Industrial EntrepreneurMemorandum, the Chief Director (Sugar), Department of Foodand Public Distribution, Ministry of Consumer Affairs, Food andPublic Distribution may, after the expiry of five years’ periodstipulated under sub-clause (1), extend the period stipulated under AB

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Asub-clause (1) initially for a further period of two years, notexceeding more than a year at a time; Provided that such extension may be granted for taking effectivesteps or for the commencement of commercial production of sugar,in consultation with the State Government concerned and theBDepartment of Legal Affairs in the Ministry of Law and Justice,if considered necessary.

(c) in case where such delay due to Court case relating to landuse, environment or such other reason, continues beyond the periodextended under item (b), the Chief Director (Sugar), DepartmentCof Food and Public Distribution, Ministry of Consumer Affairs,Food and Public Distribution may grant extension of such furtherperiod, as he deems fit, no exceeding more than a year at a time,subject to furnishing of a bank guarantee of rupees fifty lakhs foreach year for which the extension is sought, which shall be inaddition to the bank guarantee furnished under sub-clause (2) ofDclause 6B; Provided that such extension may be granted for taking effectivesteps or for the commencement of commercial production of sugar,in consultation with the State Government concerned and theDepartment of Legal Affairs in the Ministry of Law and Justice,Eif considered necessary; Provided further that in case the commercial production does notcommence within any such extended period of one year, suchbank guarantee of rupees fifty lakhs so furnished for that oneyear of extension shall be forfeited and if commercial productionFdoes not commence within any of such extended period, the bankguarantee furnished under sub-clause 6B shall also be forfeited.”

11. The appellant sought no-objection certificate on 14.04.2014 inview of the order of the High Court that if the appellant (respondentNo.6 in the writ petition) wishes to carry out construction andGdevelopment, then the appellant would have to comply with all laws,including anti-pollution, environmental protection and ecology but theGodawari Marathwada Irrigation Development Corporation refused togrant no objection certificate on 22.04.2014.

12. Hence, the appellant applied for extension of time and forHchange of location within the same taluka and same group of gram panchayat due to earlier location being no development zone, as notedby the High Court in its order dated 27.01.2014 that the proposed sugarfactory falls within the radius of 500 meters from the bank of river. Suchrequest was submitted on 16.06.2014, soon after the order of the HighCourt dated 27.1.2014. The appellant sought change of location interalia on the following grounds:

“6. ......... I state that as now the G.M.I.D.C. refused to issueN.O.C this undersigned now to take steps to search other land/location as per the earlier I.E.M and within the Aerial DistanceCertificate and therefore to take search for another land whichcomplies all the conditions and this undersigned requires moretime and therefore, the time as stipulated as per the SugarcaneControl Order needs to be extended and also considering the timespent on all the legal proceeding the validity of the bank guaranteealso considering the time spent on all the legal proceeding thevalidity of the bank guarantee also needs to be extended.

7. I further state that the proposed location complies all the normsof the survey of India as well as Aerial Distance as prescribed allthe authorities including the GNIDC Pollution Control Board andother State Authorities may take time to issue necessarypermission and no objection certificates that’s the reason, the timeneeds to be extended to set up the sugar factory as per the I.E.M.”

13. Even while the matter was pending with the State/CentralGovernment for amendment and extension of the IEM, the first writpetition was filed in 2017 after the appellant had approached StateAuthorities to measure aerial distance of the proposed location (WritPetition No. 13836 of 2017). The second writ petition was filed on orabout 26.2.2018 by the existing sugar factory after Aerial DistanceCertificate was issued to the appellant and report dated 02.01.2018 wassubmitted by the State of Maharashtra to the Union recommending grantof extension and change of location. The State in its comments to theCentral Government in response to the appellant’s seeking extensionand to change of location, stated as under:

“1. Extension of IEM

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Recently Shri Eknath Bhanudas Barge & Ors has filed writ petitionno. 13836/2017 on 27.11.2017 in Hon’ble High Court Bench AB

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AAurangabad regarding location. This office has no objection forextension of IEM considering the intervening period of litigation.

2. Change in Location

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BAccording to your office letter dated 15 September, 2015, thisoffice has intimated to Survey of India vide letter dated 17 October2015 to measure the aerial/redial distance for the locationMalewadi Dumala, Tal. Newasa, Dist Ahmednagar of M/s SwamiSamarth Sugar & Agro Industries Ltd., the Survey of India hassubmitted aerial distance report between pillars of proposed sugarCfactory and chimney of existing sugar factories vide letter dated01 January, 2018. The copy of this letter is also enclosed forreference. In this regard a Writ Petition No. 13836/2017 has filedon 27.11.2017 before Hon’ble High Court Bench Aurangabad.The request of factory regarding change in location may be dulyDconsidered at your level.”

14. The Government of India on 14.11.2018, after considering thecomments of the State Government dated 2.1.2018, allowed the extensionby observing as under:

“4. The sugar factory of M/s. Swami Samarth Sugar & AgroEIndustries Ltd. ( M/s. SSSAIL) was taken on record as NewSugar Factory as provided in explanation 2 to clause 6A ofSugarcane (Control) Order 1966, vide order dated 14.11.2018 inreference of IEM No. 3033/SIA/IMO 2010 dated 08.09.2010 forestablishment of new sugar mill at Warkhed (Ramdoh) Tal.FNewasa, Distt. Ahmednagar, Maharashtra.

5. M/s. SSAIL vide their letters dated 04.01.2018 and 06.11.2018have mentioned that they could not take effective steps, primarily,due to involvement of court cases, severe drought condition andreluctance of bank/financial institutions to finance the project.Delay appears beyond the control of project proponent.

G

6. Moreover, Commissioner of Sugar, Maharashtra State vide theirletter dated 02.01.2018 have, in principal, given permission forextension of IEM No. 3033/SIA/IMO/2010 dated 08.09.2010 forestablishment of new sugar mill at Warkhed (Ramdoh), Tal.Newasa, Distt. Ahmednagar, Maharashtra.”

H

15. Further extensions were given in similar background on15.11.2018, 12.04.2019 and 09.05.2019. The appellant submitted bankguarantees of Rs.50,00,000/- on 09.09.2019 and of Rs.37,30,000/- on10.10.2019. Request for extension of time and for change of locationwas accepted on 17.10.2019 and one year further extension was grantedup to 07.09.2020 to implement the IEM dated 08.09.2010. On 14.08.2020,the request for change of location was accepted and the existing locationwas deleted and the new location, “Gat No. 18, Malewadi Dumala, Tal.Newasa, Ahmednagar, Maharashtra” was inserted.

16. The third writ petition was filed on or about 1.10.2020 by theexisting sugar factory challenging the extension granted and change oflocation permitted by the Central Government on 14.08.2020. It wasaverred in the writ petition that the area of operation of the said existingsugar factory is 92 villages in Newasa Taluka and 122 villages in ShevgaonTaluka. In the counter affidavit filed on behalf of the appellant, it wasinter alia averred that the existing sugar factory is trying to create itsmonopoly in respect of its geographical zone while there is amplesugarcane available in the said area. The existing sugar factories are notin a position to harvest the entire sugarcane cultivated in the area onaccount of which the helpless farmers are forced to approach othersugar factories in the district for getting their sugarcane harvested. Theexisting sugar factory had even opposed the setting up of a GangamaiIndustries and Construction Limited in Taluka Shevgaon by filing a WritPetition No. 3063 of 2009. The writ petition was dismissed on 16.11.2009.It was also pointed out that the sugarcane is being cultivated in largearea in view of the back waters of Jaikwadi Major Irrigation Project andthat there is a need for setting up of a unit.

17. The High Court on considering the respective contentions ofthe parties found that the issue involved was the interpretation of Clause6C of the Control Order. It was observed that subsequent to theamendment in the Control Order by the State in the year 2011, theminimum aerial distance between the new sugar factory and the existingsugar factory is 25 kms, as cluster of sugar factories near each otherwould not be a viable proposition and may affect the survival of theexisting sugar factory. Therefore, if a new sugar factory is allowed to beestablished on the terms of the IEM issued in the year 2010, it wouldrender the existing sugar factory unviable and both sugar factories maynot be in a position to survive.

AB

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A18. The High Court further held that the appellant had not takenany effective steps within the period of two years from the date ofacknowledgment of IEM. The appellant had neither purchased the landfor four years in the name of the factory, nor placed confirmed ordersfor purchase of plant and machinery and even the civil work had notcommenced. There were no effective steps even five years of IEM.BThe change of location was sought on 16.06.2014 whereas the land atthe changed location was purchased on or about the year 2017. TheHigh Court found that the amendment in the Sugar Control Order dated24.08.2016 would not be helpful to the appellant as the IEM stood de-recognized before the said amendment was carried out. The IEM stoodCde-recognized on 08.09.2014 as the four years for commercial productionhad lapsed. Thereafter, the maximum one-year extension also lapsed on08.09.2015. Therefore, the amended provision cannot be applied to ade-recognized IEM. The High Court further found that therecommendation of the State Government was not on record for theextension of IEM. In other words, it was concluded by the High CourtDthat the IEM stood de-recognized before the Sugar Control Order wasamended on 26.08.2016. Therefore, no right accrues to the appellant. Itwas further held that the judgment of this Court reported as M/s OjasIndustries (P) Ltd v. M/s Oudh Sugar Mills Ltd.[5] relating toretrospective effect of -the amendment in the Control Order in the yearE2006 would not be applicable to the present IEM which stood de-recognized prior to the said amendment.

19. The High Court found that there was no stay on IEM, norwas there any prohibition from taking effective steps, therefore, theappellant was not prevented from taking steps on account of the ordersFof the Court in the first round of litigation. On the other hand, in thesecond round, an order was passed by the High Court on 27.03.2018 onan application filed by the existing sugar factory that the appellant hasstarted construction activity. The High Court ordered that if furtherconstruction is made, the same would be at the risk of the appellant andsubject to the decision of the writ petition and that the appellant wouldGnot be entitled to any equity in case the construction is carried out, norcan seek any equity for extension of IEM on the ground that theconstruction is being carried out. On 10.04.2018, an order was passedthat the earlier order passed on 27.03.2018 would take care of anyconstruction that would be carried out by the appellant (RespondentH5 AIR 2007 SC 1619

No.6 in the writ petition). Therefore, the appellant could not take benefitof the investment made on the land purchased and the constructionstarted. However, the High Court found that till November 2018, theappellant has not undertaken any construction work at the site and thestand of the appellant that it had invested in the construction activitycannot be taken into consideration for the reasons that extensions weregranted in violation to the provisions of the Rules and the Statute. TheHigh Court also found that as per the amendment, the new sugar factoryhad to be at a distance of not less than 25 kms.

20. With this factual background, the questions required to beexamined are as follows:

(i) Whether in the absence of any interim order against theappellant in the first round of litigation, the period duringwhich writ petitions were pending are liable to be excluded?Alternatively, whether the State/ Central Government wasjustified in excluding such period while granting extensionof IEM.

(ii) Whether the lis initiated against the appellant is a sufficientreason to exclude the period spent in such litigation andwas a reasonable ground for the State/Central Governmentto extend IEM.

(iii) Whether the amended Control Order in terms of proviso toClause 6C as amended by the State of Maharashtra on03.12.2011 would be applicable when the High Court in theearlier writ petition has held that the issue of Aerial DistanceCertificate cannot be reopened at the instance of theappellant or any other party again. Pertinently, when theorder was passed by the High Court, the amended ControlOrder was in force. Therefore, what is the effect of thesaid order?

(iv) Whether the IEM stands lapsed on the failure on the partof entrepreneur to set up the sugar factory and startproduction within the time specified in Clause 6C or suchlapsing would be only after an order in terms of Clause 6Dof the Control Order is passed?

21. The undisputed facts are that a writ petition was filed on23.09.2010, soon after the acknowledgment of IEM on 08.09.2010. It A

B

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D

E

F

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Amay be mentioned that there was no interim order against the appellant,but the fact remains that the validity of IEM on the ground of aerialdistance was disputed. The writ petition filed against the grant of AerialDistance Certificate came to be dismissed on 27.01.2014 and thereafterthe appellant sought extension of time on 16.06.2014 for implementationof the IEM in view of the litigation from 2010-2014.B

22. A perusal of the Control Order shows that initially as per theControl Order as amended in the year 2006, the time limit forimplementing the IEM was 2 + 4 years and that there was no specificClause to extend the period of implementation of IEM on account ofdelay due to any unforeseen circumstances. The subsequent amendmentCto the Control Order dated 24.08.2016 extended the period ofimplementation to 3+5 years with a further condition to grant extensionfor a maximum period of two years due to any unforeseen circumstances“beyond control”. However, in the further subsequent amendment on12.08.2018, Clause 6C(2)(a) specified that where delay is due to anyDunforeseen circumstances “beyond the control of person concerned”such as natural calamities, the extension could be granted for a furtherperiod of two years after the expiry of five years for commencing thecommercial production, not to exceed more than a year at a time.However, Clause 6C(2)(b) provided that where delay was due to anycourt case relating to land use, environment or “such other reason” thatEmay have arisen within five years from the date of filing of IEM, theMinistry of Consumer Affairs may extend the period stipulated undersub-clause (1) initially for a further period of two years not to exceedmore than a year at a time. Clause 6C(c) provided that where delay isdue to court case relating to land use, environment or such other reasonFcontinues beyond the period extended under clause (b), the Ministry ofConsumer Affairs may grant extension or such period as may deem fit,not to exceed more than a year at a time, but subject to furnishing ofbank guarantee of Rs. 50 Lakhs for each year for which extension issought, in addition to the bank guarantee furnished under sub-clause (2)of Clause 6B of the Control Order. Such Bank Guarantee is liable toGforfeiture but only in terms of Clause 6D of the Control Order.

23. With this undisputed factual and legal background, the firstthree questions, which are interrelated are taken up for discussion first.The latin maxim ‘Actus Curiae Neminem Gravabit’ i.e., the act of theCourt will not prejudice anyone, is well known, but the applicability ofH

the same to the facts of the present circumstances need to be examined.We find that the appellant was justified in not taking any effective stepspending such lis, as contemplated under Explanation 4 to Clause 6A ofthe Control Order. The arial distance is one of the foremost requirementsfor a valid IEM. This Court in a judgment reported as South EasternCoalfields Ltd. v. State of M.P. and Others[6] held that injury, if any,caused by the act of the Court shall be undone and the gain which theparty would have earned, unless it was interdicted by the order of theCourt would be restored to or conferred on the party by suitablycommanding the party liable to do so. The Court noticed that the litigationmay turn into a fruitful industry. Though litigation is not gambling yetthere is an element of chance in every litigation. Unscrupulous litigantsmay feel encouraged to approach the courts, persuading the court topass interlocutory orders favourable to them by making out a prima faciecase when the issues are yet to be heard and determined on merits andif the concept of restitution is excluded from application. It was held asunder:

“28. That no one shall suffer by an act of the court is not a ruleconfined to an erroneous act of the court; the “act of the court”embraces within its sweep all such acts as to which the courtmay form an opinion in any legal proceedings that the court wouldnot have so acted had it been correctly apprised of the facts andthe law. The factor attracting applicability of restitution is not theact of the court being wrongful or a mistake or error committedby the court; the test is whether on account of an act of the partypersuading the court to pass an order held at the end as notsustainable, has resulted in one party gaining an advantage whichit would not have otherwise earned, or the other party has sufferedan impoverishment which it would not have suffered but for theorder of the court and the act of such party. The quantum ofrestitution, depending on the facts and circumstances of a givencase, may take into consideration not only what the party excludedwould have made but also what the party under obligation has ormight reasonably have made. There is nothing wrong in the partiesdemanding being placed in the same position in which they wouldhave been had the court not intervened by its interim order whenat the end of the proceedings the court pronounces its judicial verdict which does not match with and countenance its own interim AB

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Averdict. Whenever called upon to adjudicate, the court would actin conjunction with what is real and substantial justice. The injury,if any, caused by the act of the court shall be undone and the gainwhich the party would have earned unless it was interdicted bythe order of the court would be restored to or conferred on theparty by suitably commanding the party liable to do so. Any opinionBto the contrary would lead to unjust if not disastrousconsequences. Litigation may turn into a fruitful industry.Though litigation is not gambling yet there is an element ofchance in every litigation. Unscrupulous litigants may feelencouraged to approach the courts, persuading the court toCpass interlocutory orders favourable to them by making outa prima facie case when the issues are yet to be heard anddetermined on merits and if the concept of restitution isexcluded from application to interim orders, then the litigantwould stand to gain by swallowing the benefits yielding outof the interim order even though the battle has been lost atDthe end. This cannot be countenanced. We are, therefore, of theopinion that the successful party finally held entitled to a reliefassessable in terms of money at the end of the litigation, is entitledto be compensated by award of interest at a suitable reasonablerate for the period for which the interim order of the courtEwithholding the release of money had remained in operation.”

(Emphasis supplied)

24. In the present appeal, the lis initiated by the writ petitioners inthe first round was nothing less than gamble so as to scuttle the processof commissioning of plant. The appellant was at the receiving end of theFwrit petitions filed and was at the receiving end of such litigation and theperiod spent in such lis cannot be used against the appellant.

25. In another judgment reported as Beg Raj Singh v. State ofU.P. and Others[7], this Court held that ordinary rule of litigation is thatthe rights of the parties stand crystallized on the date of commencementGof litigation and the right to relief shall be decided by reference to thedate on which the petitioner entered the portals of the Court. That wasa case where the appellant was granted sand mining lease for a periodof one year but before the expiry of the term of lease, the appellantsought renewal of lease for another period of two years. Around theH7 (2003) 1 SCC 726

time when the appellant was allowed the extension of two years, theGovernment had taken a decision to hold an auction of the sand mininglease. It was in these circumstances, this Court held as under:

“6. Having heard the learned counsel for the petitioner, as alsothe learned counsel for the State and the private respondent, weare satisfied that the petition deserves to be allowed. The ordinaryrule of litigation is that the rights of the parties stand crystallizedon the date of commencement of litigation and the right to reliefshould be decided by reference to the date on which the petitionerentered the portals of the court. A petitioner, though entitled torelief in law, may yet be denied relief in equity because ofsubsequent or intervening events i.e. the events between thecommencement of litigation and the date of decision. The relief towhich the petitioner is held entitled may have been renderedredundant by lapse of time or may have been rendered incapableof being granted by change in law. There may be othercircumstances which render it inequitable to grant the petitionerany relief over the respondents because of the balance tiltingagainst the petitioner on weighing inequities pitted against equitieson the date of judgment. Third-party interests may have beencreated or allowing relief to the claimant may result in unjustenrichment on account of events happening in-between. Else therelief may not be denied solely on account of time lost inprosecuting proceedings in judicial or quasi-judicial forum and forno fault of the petitioner. A plaintiff or petitioner having been foundentitled to a right to relief, the court would as an ordinary rule tryto place the successful party in the same position in which hewould have been if the wrong complained against would not havebeen done to him. The present one is such a case. The delay infinal decision cannot, in any manner, be attributed to the appellant.No auction has taken place. No third-party interest has beencreated. The sand mine has remained unoperated for the periodfor which the period of operation falls short of three years. Theoperation had to be stopped because of the order of the StateGovernment intervening which order has been found unsustainablein accordance with stipulations contained in the mining leaseconsistently with GO issued by the State of Uttar Pradesh. Merelybecause a little higher revenue can be earned by the StateGovernment that cannot be a ground for not enforcing the AB

C

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Aobligation of the State Government which it has incurred inaccordance with its own policy decision.”

26. In the first round of litigation, two writ petitions were filed inpublic interest to dispute the Aerial Distance Certificate. Though therewas no interim order passed in the writ petitions, such petitions createdBa cloud on the right of the appellant to set up a sugar factory at thelocation earmarked and to commence commercial production.The writpetitions remained pending for a period of four years. Therefore, theperiod spent in defending such writ petitions was validly taken intoconsideration by the State/Central Government to grant extension oftime limit fixed in the Control Order. The Government of India grantedCextension on 14.11.2018 when the Control Order as amended on12.08.2018 was operative and effective. Since the amendments carriedout in Control Order were for the benefit of the entrepreneurs, therefore,the Control Order as it is existed on the date of the extension would beapplicable. It is in terms of such Clause that the appellant was calledDupon to furnish additional bank guarantee of Rs. 50 Lakhs. Hence, thepower exercised by the Central Government is in terms of the statutoryControl Order as amended on 14.11.2018.

27. In the present case, the appellant was not the writ petitionerbefore the High Court. Rather, he was defending the permissions grantedEby the State and the Central Government. It was not prudent for theappellant to proceed with the heavy investment required for installationof a sugar factory and then to suffer the consequences depending on theoutcome of the litigation. The appellant opted for a safer option not toerect the plant and commence production because of the pendinglitigation. It was a reasonable and precautionary option exercised by theFappellant. The litigation initiated in public interest or by the rival sugarfactory cannot be used against the appellant when the writ petition wasdisposed of with the condition that there cannot be any developmentwithin 500 meters of river which necessitated the change of location.The Aerial Distance Certificate was categorically declared to be notGopen to challenge even though the State had amended the Control Orderon 03.11.2011 to increase the distance between the existing sugar factoryand the new factory was increased to 25 kilometers. Even though theControl Order was already amended by the State, but the High Courtheld that the aerial distance would be as applicable on the date of IEMacknowledged by the Central Government. It is to be noted that there isH

no challenge to the order passed by the High Court in the first round ofthe litigation. Therefore, even the High Court in the second round oflitigation was not within its jurisdiction to hold that the amended distanceregulations would be applicable.

28. Still further, the State Government while recommendingextension on 02.01.2018 did not dispute that the aerial distance betweenthe existing sugar factory and the proposed new sugar factory was lessthan 25 kms, and rightly so for good reasons. The conditions provided inthe IEM acknowledged on 08.09.2010 would alone be applicable, whichwas extended by the Central Government on 14.08.2018. The appellanthas to be restituted in terms of the order passed in South EasternCoalfields Ltd. as on the day when the lis was initiated, not by theappellant but by the other persons. The litigation at the behest of rivalparties cannot be used against the appellants, more so when they havesubstantially failed in the first round of lis.

29. The language of the Control Order has been amended timeand again with a view to enable the competent authority to grant extensionof time due to “unforeseen circumstances”. The Control Order amendedon 12.08.2018 contemplates more than one unforeseen circumstancebeyond the control of the person concerned. It also empowers thecompetent authority to extend the validity of IEM where the delay is dueto any court case relating to land use, environment or “such other reason”.Sub-clause (c) of Clause 6C empowers the competent authority to grantfurther extension for a period of not exceeding a year at a time subjectto furnishing of a bank guarantee. Therefore, the objective and purposeof such amended Control Order is that a sugar mill should commenceproduction by excluding the period spent in the court cases. Though theappellant was the defender of the IEM granted and there was no stay inthe first round of litigation, but the extension granted would fall under thecategory of “such other reason”. The judgment of this Court in SouthEastern Coalfields Ltd. is to the effect that no one shall suffer by theact of the Court which embraces within its sweep all such acts as towhich the Court may form an opinion in any legal proceedings but theCourt would not have so acted had it been correctly apprised of thefacts and the law. In the first round of litigation, challenge was to theAerial Distance Certificate, the writ petitioners have failed in suchchallenge but the High Court rightly interdicted that the appellant isrequired to comply with the anti-pollution laws in the field and the laws A

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Arelating to preservation of ecology and environment. Such order led tothe appellant looking for alternative location in view of the denial of no-objection certificate by Godawari Marathwada Irrigation DevelopmentCorporation. Therefore, the period spent in litigation for the years 2010-2014 has been rightly excluded by the competent authority.

B30. Another question which arises for consideration is whetherthe decision of the Central Government based upon the recommendationof the State Government is so arbitrary, irrational, unjust which warrantedinterference in exercise of the power of judicial review in writ jurisdiction.The High Court has not set aside the said order on only such ground butalso for the reason that the appellant has not implemented IEM withinCthe time prescribed. This Court in Tata Cellular v. Union of India[8] hasheld as under:

“70. It cannot be denied that the principles of judicial review wouldapply to the exercise of contractual powers by Government bodiesin order to prevent arbitrariness or favouritism. However, it mustDbe clearly stated that there are inherent limitations in exercise ofthat power of judicial review. Government is the guardian ofthe finances of the State. It is expected to protect the financialinterest of the State. The right to refuse the lowest or any othertender is always available to the Government. But, the principleslaid down in Article 14 of the Constitution have to be kept in viewEwhile accepting or refusing a tender. There can be no question ofinfringement of Article 14 if the Government tries to get the bestperson or the best quotation. The right to choose cannot beconsidered to be an arbitrary power. Of course, if the said poweris exercised for any collateral purpose the exercise of that powerwill be struck down.F

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77. The duty of the court is to confine itself to the question oflegality. Its concern should be:

1. Whether a decision-making authority exceeded its powers?

G

2. Committed an error of law,

3. committed a breach of the rules of natural justice,

4. reached a decision which no reasonable tribunal would havereached or,

5. abused its powers.

A

Therefore, it is not for the court to determine whether a particularpolicy or particular decision taken in the fulfilment of that policy isfair. It is only concerned with the manner in which those decisionshave been taken. The extent of the duty to act fairly will varyfrom case to case. Shortly put, the grounds upon which anadministrative action is subject to control by judicial review canbe classified as under:

B

(i) Illegality : This means the decision-maker must understandcorrectly the law that regulates his decision-making power andmust give effect to it.

C

(ii) Irrationality, namely, Wednesbury unreasonableness.

(iii) Procedural impropriety.

The above are only the broad grounds but it does not rule outaddition of further grounds in course of time. As a matter of fact,in R. v. Secretary of State for the Home Department, exBrind [(1991) 1 AC 696] , Lord Diplock refers specifically to onedevelopment, namely, the possible recognition of the principle ofproportionality. In all these cases the test to be adopted is that thecourt should, “consider whether something has gone wrong of anature and degree which requires its intervention”.

DE

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94. The principles deducible from the above are:

(1) The modern trend points to judicial restraint in administrativeaction.

F

(2) The court does not sit as a court of appeal but merelyreviews the manner in which the decision was made.

(3) The court does not have the expertise to correct theadministrative decision. If a review of the administrativeGdecision is permitted it will be substituting its own decision,without the necessary expertise which itself may be fallible.

(4) The terms of the invitation to tender cannot be open tojudicial scrutiny because the invitation to tender is in therealm of contract. Normally speaking, the decision to acceptthe tender or award the contract is reached by process ofH

82SUPREME COURT REPORTS

Anegotiations through several tiers. More often than not, suchdecisions are made qualitatively by experts.

(5) The Government must have freedom of contract. In otherwords, a fair play in the joints is a necessary concomitantfor an administrative body functioning in an administrativeBsphere or quasi-administrative sphere. However, thedecision must not only be tested by the application ofWednesbury principle of reasonableness (including its otherfacts pointed out above) but must be free from arbitrarinessnot affected by bias or actuated by mala fides.

C(6)Quashing decisions may impose heavy administrative burdenon the administration and lead to increased and unbudgetedexpenditure.

Based on these principles we will examine the facts of this casesince they commend to us as the correct principles.”

D

31. In the absence of any finding by the High Court to the effectthat the decision of the Central Government is so arbitrary, irrational orunjust, we find that the High Court has gravely erred in taking intoconsideration that appellant was remiss in not implementing IEM duringthe pendency of the writ petitions in the first round of litigation.

E

E32. The second round of litigation began even before the AerialDistance Certificate was issued. The appellant was again the defenderof the issuance of the IEM. The High Court therein found that theamendment carried out by the State of Maharashtra contemplating thatno sugar factory shall be set up within the radius of 25 kms would beFapplicable, though it is not even the averment or objection of the State inits communication dated 02.11.2018. Still further, the scheme of the ControlOrder shows that once IEM is granted, the timeline has to be determinedkeeping in view the date of the issuance of the IEM. Therefore,subsequent amendment would be applicable in respect of new sugarfactory which may be proposed to be set up. It is conceded that duringGthe interregnum from 2010 till the hearing of the appeal before this Court,no other entrepreneur has applied for IEM in the area Taluka Newasaand Shevgaon. Since no other entrepreneur has applied for IEM to setup a sugar factory in the area in question, it is not open to the existingsugar factory to contend that the revised parameters by the StateGovernment should be made applicable. IEM fixes the timeline from theH

date of issuance of the same and the subsequent amendment in theControl Order would not have any application towards the IEM alreadyissued.

33. Mr. Chidambaram, learned Senior Advocate appearing forthe existing sugar factory relies upon the judgment of this Court reportedas Ojas Industries (P) Ltd. to argue that the concept of distance withregard to the availability of sugarcane and the capacity of crushing ofthe existing and new factory is of utmost importance.

34. In the said referred case, this Court was considering anapplication filed by multiple sugar mills in the State of Uttar Pradesh.That was a case where the proliferation of IEM to block the competitionwas the cause of dispute. The IEM filed by the appellant for setting upof a sugar mill at Village Baisagapur, Distt. Lakhimpur was acknowledgedon 13.05.2004, whereas the respondent in the said appeal filed its IEMon 17.05.2004 for setting up of a sugar mill at Village Saidpur, Khurd,Distt. Lakhimpur which was at a distance of 7.2 kms from the proposedsugar mill of the appellant. The Government of India had approved theIEM filed by the appellant on 30.06.2005 whereas IEM filed by therespondent was disapproved. The respondent filed a writ petitionchallenging the IEM approved in favor of the appellant and another IEMin favor of the M/s Bajaj Hindustan Ltd. for setting up of a sugar mill atVillage Khambarkhera. This Court held as under:

“30. The Sugarcane (Control) (Amendment) Order, 2006 insertsclauses 6-A to 6-E 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. Thisconcept is based on demand and supply. This concept has to beretained because the resource, namely, sugarcane, is limited.Sugarcane is not an unlimited resource. “Distance” stands foravailable quantity of sugarcane to be supplied by the farmer tothe sugar mill. On the other hand, filing of bank guarantee for Rs1 crore is only as a matter of proof of bona fides. An entrepreneurwho is genuinely interested in setting up a sugar mill has to provehis bona fides by giving bank guarantee of Rs 1 crore. Further,giving of bank guarantee is also a proof that the businessman hasthe financial ability to set up a sugar mill (factory). Therefore,giving of bank guarantee has nothing to do with the distancecertificate.

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34. Before concluding on this issue we may reiterate that raisingof resources and application of resources by a unit is differentfrom the condition of distance. The concept of “distance” isdifferent from the concept of “setting up of unit” in the sense thatBsetting up of a unit is the main concern of the businessman whereasa concept of “distance” is an economic concept which has to betaken into account by the Government because it is the Governmentwhich has to frame economic policies and which has to take intoaccount factors such as demand and supply.”

35. This Court approved the IEM filed by M/s Balrampur ChiniCMills Ltd. at Village Kumbi, where it had invested Rs.213 crores for itsplant. The said sugar factory had also invested Rs. 152 crores at VillageGuleria. The following observations were made by this Court:

“37. We are of the view that out of two projects at Kumbhi andGuleria, Balrampur can be given milling permission for its factoryD(mill) at Kumbhi. In our present judgment we have taken the viewthat the Sugarcane (Control) (Amendment) Order, 2006 operatesretrospectively. We have also taken the view that in applying thesaid 2006 Order there will be a bar on subsequent IEM-holdersduring the specified period when the earlier IEM-holder is takingeffective steps. At the same time, we find that in the case ofEKumbhi substantial investment has been made by Balrampur. Theirprojections are better than units proposed to be set up by Oudh.Moreover, the sugarcane crushing season ends on 15-5-2007, wedo not want the cane-growers to suffer. Therefore, we grant millingpermission only to Kumbhi Project. IA No. 2 of 2007 is madeFabsolute. However, Guleria Project shall be governed by theprinciples laid down in this judgment, as indicated above.”

36. We find that the said judgment is relevant only to examine thequestion as to whether the Control Orders are retrospective or not. Thefinding about the distance while granting permission to Balrampur ChiniGMills is in the facts of that case. In the present appeal, after the IEMwas acknowledged in the year 2010, no other entrepreneur had evensought or had been granted IEM in the area in question except the existingsugar factory was permitted to enhance its crushing capacity.

37. In view of the principles laid down in the aforesaid judgment,the amendments carried out subsequently in the Control Order wouldH

also be read as retrospective as they are not creating any right for thefirst time. Clauses 6A to 6E were inserted by the amendment on10.12.2006 to substitute the press notes which were found to be undercloud by this Court. Subsequent amendments on 24.08.2016 and12.10.2018 would also be retrospective being amendments dealing withprocedural aspects and clarificatory in nature in lieu of the press notesissued earlier by the Central Government. Such amendments werenecessitated to take care of situation when IEM holder is not able totake effective steps because of unforeseen circumstances.

38. The judgment reported as Babaji Kondaji Garad v. NasikMerchants Co-operative Bank Ltd., Nasik and Others[9]andDhananjaya Reddy v. State of Karnataka[10 ]were pressed to arguethat where the statute prescribes a procedure for doing a thing, it mustbe done accordingly, unless there is any contrary indication. The saidjudgments have no applicability to the facts of the present case as theextension has been granted by the Central Government on therecommendation of the State Government keeping in view of theunforeseen circumstances faced by the appellant.

39. An argument has been raised that the validity of IEM wasextended on 15.11.2018, 12.04.2019, 09.05.2019, 17.10.2019 and18.02.2021. Such frequent extensions of the IEM show that theextensions were given at the asking without satisfying the pre-requisiteconditions to seek extensions. We do not find any merit in such arguments.The extensions were given when the second round of litigation waspending before the High Court due to which the appellant was not ableto take effective steps. The following tabular chart would show the dateof extensions and the period of extensions.

9 (1984) 2 SCC 50

10 (2001) 4 SCC 9

AB

C

D

E

F

G

H

A

9 (1984) 2 SCC 50

10 (2001) 4 SCC 9

AB

C

D

E

F

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A

A40. A perusal of the above table would show that the extensionsgranted on 15.11.2018 and 12.04.2019 were for a period which hadalready expired. The extension granted on 09.05.2019 was valid only till07.09.2019 i.e. less than four months. All the extensions were grantedwhen the matter was still pending before the High Court and were subjectto the outcome of the writ petitions. Therefore, the objections regardingBfrequent grant of extension of IEM arenot of much substance.

41. Hence, we find that the decision of the competent authority togrant extension of time is proper exercise of the powers conferred on itand cannot be said to be illegal, irrational or suffering from proceduralimpropriety. Accordingly, in respect of Question nos. (i), (ii) and (iii), weCfind that the findings recorded by the High Court are not sustainable inlaw.

42. Learned counsel for the appellant argued that Clause 6Ccontemplates that if the steps are not taken within the timeline stipulatedunder the IEM, it shall stand de-recognized and the performanceguarantee shall be forfeited. However, the performance guarantee isliable to forfeiture after giving the concerned person a reasonableopportunity of being heard. Therefore, the use of word ‘shall’ in ClauseC does not make the provision mandatory but enables the competentauthority to forfeit bank guarantee on failure to comply with the timeline.

D

E

43. In the second round of writ petitions, objections were raisedby the existing sugar factory that the appellant has started construction.Such construction was interdicted on the ground that no equity will followon the basis of any construction raised. The reasons which prevail withthe appellant in not setting up of the sugar factory or raise constructionFin the first round of litigation are very well applicable in the second roundas well. The IEM was amended subject to the writ petitions filed in thesecond round. Therefore, having objected to the construction and theHigh Court passing an order that the appellant would not be entitled toclaim any equity, it is a reasonable and prudent decision taken by theappellant not to proceed with the construction and set up a plant.

G

44. The existing sugar factory had argued that IEM stands lapsedas the appellant has failed to set up the factory and to commence thecommercial production. However, we are unable to agree with suchinterpretation. Though Clause 6C as applicable on 10.11.2006 as well ason 24.08.2016 and 12.08.2018 contemplates the IEM shall stand de-Hrecognised and the performance guarantee shall be forfeited, the performance guarantee is to be forfeited in terms of Clause 6D afterproviding the reasonable opportunity of being heard. We find that twinconditions have to be fulfilled- (i) failure to set up plant and to commenceproduction and then (ii) the forfeiture of the performance guarantee.Second will not arise unless the first is satisfied and the second stepcannot be undertaken, without complying with an opportunity of personalhearing in terms of Clause 6D of the Control Order. Unless theperformance guarantee is forfeited, there is no lapsing of IEM. Thus,unless the necessary consequences of de-recognition of IEM areundertaken, there is no automatic lapsing of IEM. Such is the languagein the subsequent amended Control Orders as well. The appellant hadfurnished a performance guarantee of Rs. 1 crore, however no stepswere taken either by the State Government or by the Central Governmentto forfeit such performance guarantee inasmuch as not even a showcause notice was issued. Thus, a conclusion cannot be drawn that theIEM is deemed to be lapsed automatically only on account of lapsing oftime.

45. The State Government had filed an affidavit to provideinformation regarding the sugarcane available and the capacity of thesugar mills in the areas. It states that during the last five crushing seasons,four sugar mills i.e., the existing sugar factory and three other mills hadcrushed the entire cane available from Newasa and Shevgaon Talukasand also crushed from neighbouring districts of Aurangabad, Jalana andBeed. It also stated that in the years 2016-17 and 2019-20, the cane wasused for fodder purpose as crushing was less than the available cane. Itis stated that Newasa and Shevgaon Talukas are drought prone andthere is scarcity of sugarcane with regard to the crushing capacity offour sugar mills. It submits that since sugarcane area restrictions (zoning)are removed in Maharashtra since the year 1997, the sugarcane growersare at liberty to provide sugarcane to any sugar mills as per their choice.In view of the said fact, the appellant cannot be denied the benefit ofsetting up of a sugar mill only on the basis of resistance from thecompetitor, who had only financial interest in mind. In case of acompetition, it is the consumer (farmer) who is the beneficiary. In thepresent case, the farmers are not getting the advantage of competitionwhich could fetch them timely payment and better services. In view ofthe said fact, we find that the order of the High Court allowing the writpetition filed by the competitors is wholly unjust and unfair and is liableto be set aside.

AB

C

D

E

F

G

H

A

46. It may be stated that one I.A. has been filed on behalf of thefarmers of the area supporting the setting up of a sugar mill by theappellant. It is not necessary to dwell on such I.A. except to state thatthe farmers are also looking forward for some competition in the area.

47. We may further state that under the Chair of Dr. C. Rangarajan,Bthe then Chairman, Economic Advisory Council to the Prime Minister, inits report dated 05.10.2012 has reported under the heading ExecutiveSummary as under:

“2. The highly perishable nature of sugarcane, the small landholdings of sugarcane farmers and the need to keep the price ofCsugar at a reasonably affordable level while also making it availablethrough the Public Distribution System (PDS) have been the driversfor regulation. The principal aspects regulated in the sugar sectorare as under:

(i) Cane reservation area and bonding — Every designatedmill is obligated to purchase from cane farmers within the canereservation area, and conversely, farmers are bound to sell to themill. As a consequence of the area requirement (distance criterion),setting up of a new mill requires approvals, notwithstandingdelicensing under the Industries Development & Regulation Act.

D

E

(ii) xxx xxx

3. Cane area reservation and bonding are intended to serve thetwin purpose of giving a minimum assured supply of the highly-perishable raw material to a mill, while committing the mill toFprocure at a minimum price (FRP/SAP). However, thisarrangement may reduce the bargaining power of the farmer, whois forced to sell to a mill even if there are cane arrears and alsoreduces the farmer’s remuneration if the design mill has a lowerrecovery rate. Mills also lose flexibility in augmenting cane supplies,especially when there is a shortfall in sugarcane production in theGcane reservation area. Moreover, mills are tied down to the qualityof cane that is supplied by the farmers in the area…..

4. The minimum distance criterion for setting up of a new mill isexpected to ensure a minimum availability of cane for all mills.This can cause distortion in the market. The virtual monopoly H

SWAMI SAMARTH SUGARS AND AGRO INDUSTRIES v. LOKNETE M. G.P. D. SAHAKARI SAKHAR KARKHANA [HEMANT GUPTA, J.]

over a large area can give the mills power over farmers, especiallywhere landholdings are smaller.

This restriction inhibits entry and further investment, and adverselyimpacts competition for purchase of sugarcane as well as forimproving mill efficiency. As such, it is not in the interest ofdevelopment of sugarcane farmers or the sugar sector, and maybe dispensed with as and when a state does away with canereservation area and bonding.”

48. In respect of cane reservation area and minimum distancecriteria, it was stated in Chapter 2, while dealing with the “Cane AreaReservation and the Minimum Distance Criterion” as under:

“2.1 Central Government has been protecting the interests ofsugarcane farmers and sugar mills through various policyinstruments. Sugarcane farmers are assured of a minimum pricefor sugarcane, payable by mills. On the other hand, sugar millshave been assured regular supply of sugarcane by providing thata minimum distance be maintained between two mills and an areabe earmarked for each mill for drawal of cane. The expectatonsimplicit in the extant system of cane area reservation and thecriterion for distance between mills could be as under:

(i) ensuring adequate cane supply to mills and preventingunhealthy competition to procure sugarcane;

(ii) ensuring crushing of the entire quantity of cane grown bysugarcane farmers in the reserved area, with no caneremaining uncrushed at the end of the season; and

(iii) increasing the productivity of sugarcane cultivation so as toincrease the income of farmers and enhance supplies andsugar recovery for mills.

xxxxxxxxx

2.5Those who suggest that the reservation of cane area bedone on a permanent basis argue that the system facilitatessugar factories to undertake cane development work in theirrespective areas. This argument of the industry may betrue in some selected pockets, but appears fallacious when A

B

C

D

E

F

G

H

90SUPREME COURT REPORTS

A

one looks at the trends of sugarcane productivity in thecountry. Cane productivity was 68.57 tonnes/ha in 2000-01and stood at about the same level in 2010-11 (68.59 tonnes/ha), marginally declining thereafter to 68.09 tonnes/ha in2011-12. Thus, for the country as a whole, cane areareservation does not seem to have promoted productivity.

B

xxxxxx

xxx

2.7Those in favour of scrapping the cane area reservationreiterate the views of the Thorat Committee (2009). Thepresent system ties farmers to supply cane to a particularCmill whether or not s/he is satisfied with it. The mootquestion is whether a farmer should remain “bonded” andsupply cane to a particular mill even if it has not madepayment for her/his earlier supplies. There is a case fordispensing with cane area reservation and giving freedomDto the farmers to supply their cane to any mill of their choice.There is no cane area reservation system in Maharashtraand non-members of cooperative mills are free to supplycane to any mill which they like.

2.8The system of cane area reservation and maintaining aEminimum distance between mills has been shielding themfrom competition and has created perpetual monopolies.This policy does not allow a farmer to participate in acompetitive market and get the best price for her/his cane.The farmer has no freedom to choose the buyer and ismore likely to get delayed payments and unfair price forFthe cane than in a competitive set up. Thus, these policieshave led to the continued functioning of inefficient sugarmills by giving them a guaranteed supply of cane and bynot allowing market forces to work towards a viableequilibrium. For the growth of the sector and in the interestGof efficiency in this industry, policy should allow theSchumpeterian “process of creative destruction” to work.”

49. The Ministry of Consumer Affairs, Food and Public Distributionhas referred to recommendations of Dr. C. Rangarajan Committee. Thegist of the recommendations of the Committee and Implementation ofHRecommendations of Dr. Rangarajan Committee, is as under:

SWAMI SAMARTH SUGARS AND AGRO INDUSTRIES v. LOKNETE M. G.P. D. SAHAKARI SAKHAR KARKHANA [HEMANT GUPTA, J.]

50. We also note the reasoning given by the Central Governmentthat in order to avoid unhealthy competition, the licensing under theIndustries (Development and Regulation) Act, 1951 was done away withon 31.08.1998. Unhealthy competition has two major aspects- one relatingto the existing and new sugar factory, and second in the context of thefarmers. On account of competition between the existing and new sugarfactory, it would be the farmers who will be the beneficiary as theywould have an option to select the sugar mill which provides better servicein the manner of payment of price. Keeping in view the recommendationsof the Rangarajan Committee and the fact that the Central Governmenthas exercised its jurisdiction to grant extension in time, the ultimatebeneficiary would be the farmer and not the existing or the new sugarfactory.

51. Thus, we find the order of the High Court to be unsustainable.Consequently, the appeals are allowed and the writ petitions are dismissed.The period spent in the second round of litigation shall also be excludedwhile determining the period during which the plant had to be set up andto commence commercial production.

Nidhi Jain and Amarendra Kumar(Assisted by : Pragya Samal, LCRA)

Appeals allowed.

B

D

E

F

G

H