Essential Commodities Act, 1955:s. 3 – Sugarcane(Control) Order, 1966 – clause 6A, 6C & 6D –Restriction on setting two sugar factories – Time limit for implementing Industrial Entrepreneur Memorandum (IEM) – In 2010, the appellant applied for IEM which was acknowledged by Govt. of India on the basis of a certificate regarding aerial distance between the existing sugar factory (Respondent no. 1) set up in 1974 and the nearby proposed sugar factory –Writ petitions were filed challenging the grant of IEM to the Appellant, one on the ground of aerial distance of proposed sugar factory and existing factory was more than 15 kms and that the proposed sugar factory falls within the radius of 500 meters from the bank of river thereby falling under no development zone – High Court held that the appellant is required to comply with all laws including the anti-pollution, environmental protection and ecology; and that the issue of aerial distance certificate cannot be reopened again–Subsequently the State of Maharashtra directed that in terms of proviso to Clause 6A of the Control Order, 1966 no new sugar factory would be set up within the radius of 25 kms of any existing sugar factory or any other new factory– Thereafter, the time limit for implementing industrial entrepreneur memorandum was amended – Appellant then sought NOC in view of the order of the High Court which was not granted by State authorities – Consequently, the appellant applied for extension of time and change of location due to earlier location being no development zone and was accepted – Writ petition by the existing sugar factory challenging grant of extension and change of location– Government allowed the extension a couple to times till 2020– Another writ petition filed by the existing sugar factory challenging grant of extension and change of location – High Court held that the appellant had not taken any effective steps within the period of two years from the date of the acknowledgement of EMI; that the IEM stood de-recognized before the Sugar Control Order was amended on 26.08.2016 which extended the period of implementation;that extensions were granted in violation to the provisions of the Rules and the Statute; and that as per the amendment, the new sugar factory had to be at a distance of not less than 25 kms–Issue arose as regards, whether in the absence of any interim order against the appellant in the first round of litigation, the period during which writ petitions were pending are liable to be excluded; whether the State/ Central Government was justified in excluding such period while granting extension of IEM; whether the lis initiated against the appellant is a sufficient reason to exclude the period spent in such litigation and was a reasonable ground for the State/Central Government to extend IEM; whether the amended Control Order in terms of proviso to Clause 6C as amended by the State of Maharashtra on 03.12.2011 would be applicable when the High Court in the earlier writ petition has held that the issue of Aerial Distance Certificate cannot be reopened at the instance of the appellant or any other party again, and whether the IEM stands lapsed on the failure on the part of entrepreneur to set up the sugar factory and start production within the time specified in Clause 6C or such lapsing would be only after an order in terms of Clause 6D of the Control Order is passed – Held: Latin maxim ‘Actus Curiae Neminem Gravabit’, states that the act of the Court will not prejudice anyone - During the whole litigation history, the appellant was at the receiving end of the writ petitions, thus, the period spent in such lis cannot be used against him - Though there was no interim order passed in the writ petitions, such petitions created a cloud on the right of the appellant to set up a sugar factory at the location earmarked and to commence commercial production - Writ petitions remained pending for a period of four years, the period spent in defending such writ petitions was validly taken into consideration by the State/Central Government to grant extension of time limit fixed in the Control Order - Extensions were given when the second round of litigation was pending before the High Court due to which the appellant was not able to take effective steps- Decision of the competent authority to grant extensions of time was a proper exercise of the powers- the subsequent amendment in the Control Order would not have any application towards the IEM already issued–Unless the performance guarantee is forfeited, there is no lapsing of IEM –Twin conditions have to be fulfilled, (i) failure to set up plant and to commence production and then (ii) the forfeiture of the performance guarantee – Second will not arise unless the first is satisfied and the second step cannot be undertaken, without complying with an opportunity of personal hearing in terms of Clause 6D of the Control Order – Unless the necessary consequences of de- recognition of IEM are undertaken, there is no automatic lapsing of IEM – Appellant had furnished a performance guarantee of Rs. 1 crore, however, no steps taken either by State Government or by the Central Government to forfeit such performance guarantee inasmuch as not even a show cause notice was issued – Thus, a conclusion cannot be drawn that the IEM is deemed to be lapsed automatically only on account of lapsing of time –Order passed by the High Court, is unsustainable and is set aside.
Allowing the appeal, the Court
HELD: 1.1. The latin maxim ‘Actus Curiae Neminem Gravabit’ i.e., the act of the Court will not prejudice anyone, is well known, but the applicability of the same to the facts of the present circumstances need to be examined. The appellant was justified in not taking any effective steps pending such lis, as contemplated under Explanation 4 to Clause 6A of the Control Order. The arial distance is one of the foremost requirements for a valid IEM. Injury, if any, caused by the act of the Court shall be undone and the gain which the party would have earned, unless it was interdicted by the order of the Court would be restored to or conferred on the party by suitably commanding the party liable to do so. The Court noticed that the litigation may turn into a fruitful industry. Though litigation is not gambling yet there is an element of chance in every litigation. Unscrupulous litigants may feel encouraged to approach the courts, persuading the court to pass interlocutory orders favourable to them by making out a prima facie case when the issues are yet to be heard and determined on merits and if the concept of restitution is excluded from application. [Para 23][74-G-H; 75-A-D]
1.2. The appellant was at the receiving end of the writ petitions 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 writ petitions, such petitions created a cloud on the right of the appellant to set up a sugar factory at the location earmarked and to commence commercial production. The writ petitions remained pending for a period of four years. Therefore, the period spent in defending such writ petitions was validly taken into consideration by the State/Central Government to grant extension of time limit fixed in the Control Order. Government of India granted extension on 14.11.2018 when the Control Order as amended on 12.08.2018 was operative and effective. The amendments carried out in Control Order were for the benefit of the entrepreneurs, therefore, the Control Order as it existed on the date of the extension would be applicable. It is in terms of such Clause that the appellant was called upon to furnish additional bank guarantee of Rs. 50 Lakhs. Hence, the power exercised by the Central Government is in terms of the statutory Control Order as amended on 14.11.2018. [Para 26][78-B-D]
1.4 The Aerial Distance Certificate was categorically declared to be not open to challenge even though the State had amended the Control Order on 03.11.2011 to increase the distance between the existing sugar factory and the new factory was increased to 25 kilometers. Even though the Control Order was already amended by the State, but the High Court held that the aerial distance would be as applicable on the date of IEM acknowledged by the Central Government. It is to be noted that there is no challenge to the order passed by the High Court in the first round of the litigation. Therefore, even the High Court in the second round of litigation was not within its jurisdiction to hold 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 amended time and again with a view to enable the competent authority to grant extension of time due to “unforeseen circumstances”. The Control Order amended on 12.08.2018 contemplates more than one unforeseen circumstance beyond the control of the person concerned. It also empowers the competent authority to extend the validity of IEM where the delay is due to any court case relating to land use, environment or “such other reason”. Subclause (c) of Clause 6C empowers the competent authority to grant further extension for a period of not exceeding a year at a time subject to furnishing of a bank guarantee. Therefore, the objective and purpose of such amended Control Order is that a sugar mill should commence production by excluding the period spent in the court cases. Though the appellant was the defender of the IEM granted and there was no stay in the first round of litigation, but the extension granted would fall under the category of “such other reason”. In the first round of litigation, challenge was to the Aerial Distance Certificate, the writ petitioners have failed in such challenge but the High Court rightly interdicted that the appellant is required to comply with the anti- pollution laws in the field and the laws relating to preservation of ecology and environment. Such order led to the appellant looking for alternative location in view of the denial of no-objection certificate by Godawari Marathwada Irrigation Development Corporation. Therefore, the period spent in litigation for the years 2010-2014 has been rightly excluded by the competent authority. [Para 29][79-D-H; 80-A-B]
1.6. In the absence of any finding by the High Court to the effect that the decision of the Central Government is so arbitrary, irrational or unjust. The High Court has gravely erred in taking into consideration that appellant was remiss in not implementing IEM during the pendency of the writ petitions in the first round of litigation. [Para 31][82-D-E]
1.7. The scheme of the Control Order shows that once IEM is granted, the timeline has to be determined keeping in view the date of the issuance of the IEM. Therefore, subsequent amendment would be applicable in respect of new sugar factory which may be proposed to be set up. IEM fixes the timeline from the date of issuance of the same and the subsequent amendment in the Control Order would not have any application towards the IEM already issued.[Para 32][82-F-G; 83-A]
1.8. All the extensions were granted when the matter was still pending before the High Court and were subject to the outcome of the writ petitions. Therefore, the objections regarding frequent grant of extension of IEM are not of much substance. [Para 40][86-A-B]
1.9. The Decision of the competent authority to grant extension of time is proper exercise of the powers conferred on it and cannot be said to be illegal, irrational or suffering from procedural impropriety [Para 41][86-C]
1.10. Though Clause 6C as applicable on 10.11.2006 as well as on 24.08.2016 and 12.08.2018 contemplates the IEM shall stand de- recognised and the performance guarantee shall be forfeited, the performance guarantee is to be forfeited in terms of Clause 6D after providing the reasonable opportunity of being heard. The twin conditions have to be fulfilled- (i) failure to set up plant and to commence production and then (ii) the forfeiture of the performance guarantee. Second will not arise unless the first is satisfied and the second step cannot be undertaken, without complying with an opportunity of personal hearing in terms of Clause 6D of the Control Order. Unless the performance guarantee is forfeited, there is no lapsing of IEM. Thus, unless the necessary consequences of de- recognition of IEM are undertaken, there is no automatic lapsing of IEM. Such is the language in the subsequent amended Control Orders as well. The appellant had furnished a performance guarantee of Rs. 1 crore, however no steps were taken either by the State Government or by the Central Government to forfeit such performance guarantee inasmuch as not even a show cause notice was issued. Thus, a conclusion cannot be drawn that the IEM is deemed to be lapsed automatically only on account of lapsing of time. [Para 44][86-G-H; 87-A-D]
1.11.The appellant cannot be denied the benefit of setting up of a sugar mill only on the basis of resistance from the competitor, who had only financial interest in mind. In case of a competition, it is the consumer (farmer) who is the beneficiary. In the present case, the farmers are not getting the advantage of competition which could fetch them timely payment and better services [Para 45][87-G]
1.12. The reasoning given by the Central Government that in order to avoid unhealthy competition, the licensing under the Industries (Development and Regulation) Act, 1951 was done away with on 31.08.1998. Unhealthy competition has two major aspects- one relating to the existing and new sugar factory, and second in the context of the farmers. On account of competition between the existing and new sugar factory, it would be the farmers who will be the beneficiary as they would have an option to select the sugar mill which provides better service in the manner of payment of price. Keeping in view the recommendations of the Rangarajan Committee and the fact that the Central Government has exercised its jurisdiction to grant extension in time, the ultimate beneficiary would be the farmer and not the existing or the new sugar factory. [Para 50][91-D-E]
1.13. The order of the High Court was held to be unsustainable. The writ petitions are dismissed. The period spent in the second round of litigation shall also be excluded while determining the period during which the plant had to be set up and 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 Raj Singh 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 Mills Ltd. AIR 2007 SC 1619 : [2007] 4 SCR 661, Tata Cellular v. Union of India (1994) 6 SCC 651: [1994] 2 Suppl. SCR 122, Babaji Kondaji Garad v. Nasik
Merchants Co-operative Bank Ltd., Nasik and Others (1984) 2 SCC 50 : [1984 ] 1 SCR 767, Dhananjaya Reddy v. State of Karnataka (2001) 4 SCC 9 : [2001] 2 SCR 399 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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