Bombay High Court
Indian Sugar Manufacturing Co. Ltd vs Union Of India Through Ministry Of ... on 25 January, 2019
Author: A.A.Sayed
Bench: A.A. Sayed, Riyaz I. Chagla
901-WP-10628-16.doc
Sharayu Khot & U. Kambli.
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 10628 OF 2016
Indian Sugar Manufacturing Company ...Petitioner
Limited
Versus
Union of India & Ors. ...Respondents
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Mr. A.V. Anturkar, Senior Advocate, a/w Ms. Kalyani Tulankar,
Mr. Ranjit Shinde, i/by Kalyani Tulankar, for the Petitioner.
Mr. Y.R. Mishra, a/w Mr. A.R. Varma & U. Lokegaonkar, for the
Respondent No. 1-UoI.
Mr. A.A. Alaspurkar, AGP, for the Respondents No. 2 and 3.
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CORAM : A.A. SAYED &
RIYAZ I. CHAGLA, JJ.
DATE : 24/25 January 2019
JUDGMENT :(Per A.A.Sayed,J.)
1. By this Petition under Article 226 of the Constitution 1/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc of India, the Petitioner has impugned the order dated 21 January 2016 passed by the Respondent No. 3 Chief Director (Sugar) holding that the Directorate of Sugar was right in confiscating/invoking the Bank Guarantee No. 97 of 2011 of Rs. 1.00 Crore submitted by the Petitioner, thereby rejecting the request of the Petitioner for refund of the said amount of Rs. 1.00 Crore.
2. The Petitioner is a company registered under the provisions of the Companies Act, 1956. The Petitioner initially decided to establish a sugar plant at Village Kewad, Taluka Mhada, District Solapur (hereinafter referred to "the 1st site"). The Petitioner obtained a Certificate of Aerial Distance from the Director, Survey of India, Maharashtra and Goa Geo-spatial Data Centre, Pune, on 20th April 2010. Based on the said Certificate, the Commissioner of Sugar, Maharashtra State, Pune, issued the Aerial Distance Certificate certifying that other adjacent Sugar factories from the 1st site were at a distance of more than 15 kms. The Petitioner thereafter filed IEM (Industrial Entrepreneur 2/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc Memorandum) on 17th February 2011 in the Ministry of Commerce and Industry, Government of India. The Petitioner has relied upon acknowledgement of the Ministry of Commerce and Industry in respect of the filing of the aforesaid IEM. In view of the provisions of the Essential Commodities Act and the Sugarcane [Control] Order, 1966 as amended by Notification dated 10 November 2006, the Petitioner furnished a Bank Guarantee No. 97 of 2011 dated 8th March 2011, valid until 7 September 2015, in a sum of Rs. 1.00 Crore drawn on State Bank of India. According to the Petitioner, due to pollution and environmental reasons and cane potentiality, it decided to shift the location of the sugar plant 1 k.m. away from the original location i.e. from the 1st site, to a new location at Village Turk-Pimpri, Taluka Barshi, District Solapur (hereinafter referred to "the 2nd site").
3. The Petitioner approached the Commissioner of Sugar for Aerial Distance Certificate at the 2nd site. The Petitioner claims that it was informed by the Commissioner of Sugar, Pune, that this will be a change of location and therefore the requirement of Rule 3/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc 6A and Rule 6E of the Rules inserted by the amendment of the year 2006 in the Sugar (Control) Order 1966 would be applicable and the Petitioner would have to apply afresh and follow the procedure again from the beginning. It is the case of the Petitioner that instead of joining issue with the Commissioner of Sugar, it opted to obtain a fresh Aerial Distance Certificate from Survey of India for the 2nd site, which was accordingly issued on 16th May 2011. After obtaining a fresh Aerial Distance Certificate from the Survey of India, the Petitioner applied on 19th May 2011 to the Commissioner of Sugar, Pune, for Aerial Distance Certificate in respect of the 2nd site. As no decision was taken by the Commissioner of Sugar, Pune, for issuance of the Aerial Distance Certificate, the Petitioner filed the Writ Petition being Writ Petition No. 7108 of 2011 in this Court. By an order dated 16 September 2011, the Division Bench of this Court accepted the statement of the learned AGP that the Commissioner of Sugar, Pune, shall decide the Application of the Petitioner in accordance with law within six weeks.
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4. On 20th September 2011, the Petitioner addressed a letter to the Commissioner of Sugar, Pune, enclosing therewith a copy of the order dated 16 September 2011 passed by this Court and requested the Commissioner of Sugar to decide the Application dated 19th May 2011 for issuance of Aerial Distance Certificate in respect of the 2nd site. By an order dated 24th October 2011, the Commissioner of Sugar, Pune, rejected the Application of the Petitioner by holding that the Turk-Pimpri Unit (2nd site) is located within 15 k.m. distance from Kewad (1st site) and rejected the Application. The Commissioner observed that there is no provision for him to give permission to change the location of the sugar factory from the 1st site to the 2nd site.
5. At this juncture, it may be stated that both the sites i.e. the Unit at Kewad (1st site) and at Turk-Pimpri Unit (2nd site) are Units which belong to the Petitioner and the Petitioner has not proceeded with the construction of the sugar factory at Kewad Unit (1st site) as it wanted to shift the sugar factory to Turk-Pimpri (2nd site). Aggrieved by the order dated 24th October 2011 of the 5/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc Commissioner of Sugar rejecting the Application for issuance of Aerial Distance Certificate, the Petitioner filed Writ Petition No. 187 of 2012 in this Court. In the said Petition, it was averred that the letter dated 26 September 2011 referred to by the Commissioner of Sugar was not an Application and the original Application was dated 19 May 2011. It was contended that even for the sake of argument, if it was assumed that the Application could not have been considered for change of location, the Application could have been considered as a fresh Application. It was further contended that the Petitioner wanted to set-up the sugar factory at Turk-Pimpri (2nd site) and does not want to set- up the sugar factory at Kewad (1st site) and that there was no other 'new' or 'existing' sugar factory within 15 km. within the meaning of provisions of Rule 6A to Rule 6F of the Sugar (Control) Order 1966 as amended by 2006 Amendment. The said Writ Petition was allowed by this Court on 25th September 2013. The Division Bench whilst disposing of the Petition, in paragraph 4 to 11 observed as follows:-
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January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc "4. The learned counsel for the Petitioner submits that, Respondent No.1 has refused to grant the aerial distance certificate on the ground that the Petitioner has not given any documentary evidence to show that, he did not propose to start the factory at the earlier location namely village Kevad. It is submitted that, Respondent No.1 has committed error of law in refusing to grant the permission at the new location on the ground that the aerial distance certificate cannot be granted by him, by changing the location. It is submitted that the Petitioner has not started the factory at Kevad and as such, therefore, the question of producing any documentary proof does not arise.
5. The learned AGP has filed an affidavit in reply. The Assistant Director, Sugar has filed affidavit in reply, in which he reiterated stand taken by the Respondents.
6. In our view, the impugned order, therefore, is to be set aside firstly on the ground that, there is non-
application of mind on the part of the Commissioner of Sugar in rejecting the application seeking aerial distance certificate. The Petitioner has made averments in this Petition on oath that, he does not propose to start Sugar Factory at Kevad, 7/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc Tal. Madha, Dist. Solapur and proposes to start his factory at Turkpimpri. There is no question of there being a change of location of the sugar factory since the Petitioner has not established or constructed factory at Kevad. The Petitioner is willing to file an undertaking in this Court that, he shall not start Sugar Factory at Kevad, Tal. Madha, Dist. Solapur, in the event aerial distance certificate is granted in his favour which has been granted in his favour earlier.
7. Secondly, the Commissioner of Sugar has overlooked the fact that the application which the Petitioner has filed was seeking aerial distance certificate, the Commissioner of Sugar has treated the said application, as an application seeking change of location.
8. In our view, the approach of the Commissioner of Sugar, Respondent No.1, is erroneous. The impugned order, therefore, now will have to be set aside. Respondent No.1 is directed to issue aerial distance certificate to the Petitioner at the new location within four weeks from today.
9. The Petitioner shall file an undertaking in this Court within two weeks from today that, he shall 8/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc not start a new factory at the earlier location namely Kevad, Tal. Madha, Dist. Solapur.
10. If the undertaking is not filed within two weeks from today, the directions given by this Court shall stand vacated without further reference to this Court. Accordingly, Petition is disposed of.
11. The copy of the undertaking shall be made available to the Commissioner of Sugar / Respondent No.1."
(emphasis supplied)
6. The Petitioner accordingly filed the Undertaking of it's Chairman. The Petitioner was thereafter issued the Aerial Distance Certificate by the Commissioner of Sugar, Pune, in compliance with directions in paragraph 8 of the aforesaid order dated 25 September 2013. The Petitioner then filed IEM for the 2nd site and also furnished another Bank Guarantee of Rs. 1.00 Crore in respect of the 2nd site.
7. By an order dated 4/9th April 2014, the Deputy Director (ST), Directorate of Sugar, invoked / enforced the Bank Guarantee No. 97 of 2011 dated 8th March 2011 furnished by the 9/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc Petitioner in respect of the 1st site and realized the amount of its 1 Crore. Aggrieved by this order, the Petitioner again approached this Court by filing Writ Petition No. 5108 of 2014. By an order dated 21 July 2015, the order dated 4/9th April 2014 of the Deputy Director (ST) was set aside and the matter was remitted back to the Respondent No. 1 - Union of India through its Ministry of Consumer Affairs, Department of Food and Public Distribution, Directorate of Sugar, with directions to pass a fresh order within a period of eight weeks after affording an opportunity of hearing to the Petitioner.
8. On remand, the Respondent No. 3 Chief Director (Sugar), by the impugned order dated 21st January 2016 concluded that the act of Directorate of Sugar in confiscation/invocation of the Bank Guarantee No. 97 of 2011 dated 8th March 2011 was within the ambit of law. Hence, the present Petition.
9. We have heard the learned Senior Counsel for the 10/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc Petitioner, learned Counsel for the Respondent No. 1 and the learned AGP.
10. The setting up of sugar factory is regulated by the Sugar (Control) Order, 1966. The Central Government amended the Sugarcane (Control) Order, 1966 vide Notification dated 10 November 2006 titled "Sugarcane (Control) (Amendment) Order 2006" interalia to put restriction on setting up of two sugar factories within the radius of 15 kms of any 'existing' sugar factory or another 'new' sugar factory. Explanation (1) & (2) to Clause 6A read as follows:-
"Explanation 1.- An existing sugar factory shall mean a sugar factory in operation and shall also include a sugar factory that has taken all effective steps as specified in Explanation 4 to set up a sugar factory but excludes a sugar factory that has not carried out its crushing operations for last five years.
Explanation 2.- A new sugar factory shall mean a sugar factory, which is not an existing sugar factory, but has filed the Industrial Entrepreneur Memorandum as 11/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc prescribed by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry in the Central Government and has submitted a performance guarantee of rupees one crore to the Chief Director (Sugar), Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution for implementation of the Industrial Entrepreneur Memorandum within the stipulated time or extended time as specified in clause 6C."
Explanation 4 defines `effective steps' as under:
Explanation 4.- The effective steps shall mean the following steps taken by the concerned person to implement the Industrial Entrepreneur Memorandum for setting up of sugar factor:-
(a) purchase of required land in the name of the factory;
(b) placement of firm order for purchase of plant and machinery for the factory and payment of requisite advance or opening of irrevocable letter of credit with suppliers;
(c) commencement of civil work and construction of building for the factory;
(d) sanction of requisite term loans from banks or 12/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc financial institutions;
(e) any other step prescribed by the Central Government, in this regard through a notification;"
11. The Petitioner had approached this Court on three occasions by filing three Writ Petitions viz. Writ Petition No.7108 of 2011, Writ Petition No.187 of 2012 and Writ Petition No.5108 of 2014. The Commissioner of Sugar, while rejecting the Application for Aerial Distance Certificate vide order dated 24 October 2011, interalia, held that there was no provision for the Commissioner of Sugar to give permission to change the location of the new sugar factory and that the location of the 2nd site was within 15 kms. of 1st site. It is in these circumstances that the Petitioner had approached this Court vide Writ Petition No.187 of 2012 challenging the order dated 24 October 2011 of the Commissioner of Sugar rejecting grant of the Aerial Distance Certificate. By the order dated 25 September 2013, the Division Bench held that approach of the Commissioner of Sugar was erroneous and he had overlooked the fact that the Application of the Petitioner was for Aerial Distance Certificate and not for 13/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc change in location. The Division Bench accepted the case of the Petitioner that it did not propose to start the sugar factory at the 1st site. The Division Bench set aside the order dated 24 October 2011 of the Commissioner of Sugar and directed the Commissioner of Sugar to issue Aerial Distance Certificate to the Petitioner at the new location (2nd site) within four weeks. The Division Bench directed the Petitioner to file an Undertaking within two weeks that the Petitioner shall not start a new factory at the 1st site i.e. at Kevad, Taluka: Madha, District:Solapur, which Undertaking was filed by the Petitioner. In the said Undertaking dated 1 October 2013 filed pursuant to the order of the Division Bench, the Chairman of the Petitioner has stated as under:
"3. ... I say that this Honourable Court (Coram: Shri V.M.Kanade and Shri S.C.Gupte, JJ), also directed the Petitioner to file the Undertaking that the earlier location i.e. at Kewad, Taluka: Madha, District: Solapur where the I.E.M. was granted to the Petitioner, the Petitioner has not started any construction work or any activity of erecting the Sugar Factory. I say that, I state on oath that no any activities regarding the construction or erection of the 14/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc Sugar Factory or any effective steps taken by the Petitioner in respect of the location in Kewad for which the I.E.M. dated 17/02/2011 was granted to the Petitioner.
4. I say that, I also make the further statement that no any effective steps or any steps for construction or erection of the Sugar Factory will be taken by the Petitioner at Kewad, Taluka: Madha, District: Solapur for which I.E.M. dated 17/02/2011 was filed. I say that the Petitioner will take further steps for the erection of the Sugar Factory as per the proposed I.E.M. which will be granted for the location of Turk-Pimpri, Taluka:Barshi, District : Solapur only.
5. I say that the Board of Directors of Petitioner has also passed the resolution and thereby also given powers to me to file this undertaking. I say that hence as per the directions given by this Hon'ble Court (Coram: Shri Kanade and Shri Gupte-JJ), dated 25 September 2013 I am filing this undertaking.
6. I say that will not erecting the Sugar Factory at Kewad, Taluka:Madha, District:Solapur for which I.E.M. dated 17/02/2011 was filed earlier."
12. The Respondents were thus well aware that the Petitioner was not to set up a sugar factory at the 1st site and had 15/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc filed an I.E.M. and had also furnished another Bank Guarantee of Rs.1.00 Crore in respect of establishment of the sugar factory at the 2nd site.
13. By order dated 4/9 April 2014, however, the Bank Guarantee No.97 of 2011 dated 8 March 2011, which was furnished by the Petitioner in respect of establishment of sugar factory at the 1st site was invoked / enforced. The Petitioner had, therefore, approached this Court by filing Writ Petition No.5108 of 2014. By order dated 21 July 2015, the order passed by the Respondent No.1 - Union of India through the Ministry of Consumer Affairs, Department of Food and Public Distribution, Directorate of Sugar & Vegetable Oils, was set aside and the matter remanded to the Respondent No. 1 with a direction to pass a fresh order after hearing the Petitioner. On perusal of the impugned order, (after remand), it is seen that the Chief Director (Sugar) after hearing the Petitioner held that the act of the Directorate of Sugar in confiscating / invoking Bank Guarantee No.97 of 2011 dated 8 March 2011 was well within the ambit of 16/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc Law. The Chief Director (Sugar) curiously states in the impugned order that "it is reasonable to believe that M/s. ISMCL has not altogether given up their idea of establishing proposed sugar factory in future at a place for which they willfully obtained IEM."
14. We find that the aforesaid observation/finding of the Chief Director (Sugar) is completely erroneous. When an Undertaking has been given to this Court by the Petitioner in terms of the order dated 25 September 2013 of this Court in Writ Petition No. 187 of 2012 that the Petitioner shall not start new factory at the 1st site namely at Kewad, Taluka:Madha, District:Solapur, the Chief Director (Sugar) ought to have taken cognizance of the Undertaking filed by the Petitioner in pursuance of the order passed by this Court. Once this Court vide order dated 25 September 2013 accepted the case of the Petitioner upon Undertaking being filed by the Petitioner in terms of the directions contained in the said order dated 25 September 2013, there was no room for the Chief Directorate (Sugar) in arriving at his own assumptions or hypothesis that the Petitioner cannot be said to 17/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc have altogether given up the idea of establishing the proposed sugar factory at the 1st site. It is pertinent to note that the Commissioner of Sugar in his order dated 24 October 2011 had observed that there was no provision to permit the change of location of the sugar factory. It is not disputed before the Court that the Petitioner has not constructed sugar factory at the 1st site and has given an Undertaking that it does not propose to start a sugar factory at the 1st site. The sugar factory which the Petitioner was proposing to construct at the 1st site is about one kilometer away from the 2nd site for which the Petitioner has been issued the Aerial Distance Certificate by the Commissioner of Sugar, Pune, pursuant to the order dated 25 September 2013 of this Court after the Petitioner had obtained the Aerial Distance Certificate from Survey of India for the 2nd site. Learned Senior Counsel for the Petitioner has placed on record photographs to show that the Petitioner has not carried out any construction to establish the sugar factory at the 1st site. We are informed that the sugar factory at the 2nd site is now constructed and fully operational. The Petitioner has thus taken effective steps and 18/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc established the sugar factory at the 2nd site and had also submitted another Bank Guarantee of Rs.1.00 Crore in respect of the 2nd site. The Supreme Court in the case of Ojas Industries Pvt.Ltd. V/s. Oudh Sugar Mills Ltd. & ors. 1, has said that filing of the Bank Guarantee for Rs.1.00 crore is only as a matter of proof of bonafides of the Applicant to start a sugar factory and that it proves that the Applicant has the financial ability to set up the sugar factory.
15. In view of the aforesaid discussion, we find that the Respondent No.3-Chief Director (Sugar) was not at all justified in holding that the confiscating / invoking the Bank Guarantee No. 97 of 2011 dated 8 March 2011 was within the ambit of law. The Bank Guarantee No.97 was in the nature of performance guarantee. This Court having accepted the case of the Petitioner that it will not establish the sugar factory at the 1st site, there was no question of performance by the Petitioner of implementing the IEM and establishing the sugar factory at the 1st site, for which the Bank Guarantee No.97 was furnished by the Petitioner. 1 (2007) 4 SCC 723 19/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc
16. In the circumstances, we are of the view that the impugned order cannot be sustained. Hence, we pass the following order:
ORDER
(i) The impugned order of the Chief Director (Sugar) dated 21 January 2016 is set aside.
(ii) The Respondents are directed to refund the amount of Rs. 1.00 crore, which was realised by invoking / enforcing the Bank Guarantee No. 97 of 2011 dated 8th March 2011, to the Petitioner.
(iii) We record the statement of the learned Senior Counsel for the Petitioner that the Petitioner is not pressing for any interest on the aforesaid amount of Rs.1.00 Crore. A copy of the Board Resolution as well as copy of the letter addressed by the Petitioner to its Advocate stating that the 20/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 ::: 901-WP-10628-16.doc Petitioner gives up the interest on the aforesaid amount of Rs. 1.00 crore is placed on record and marked 'X' (colly).
(iv) The amount of Rs. 1.00 crore shall be refunded by the Respondents to the Petitioner within a period of two months from today, failing which the Respondents shall in addition pay interest on the said amount from the date of this order at the rate of 7.5% p.a. till repayment.
17. The Petition is allowed in the aforesaid terms.
[RIYAZ I. CHAGLA J.] [A.A. SAYED, J.] 21/21 January 24, 2019 ::: Uploaded on - 02/03/2019 ::: Downloaded on - 27/03/2020 06:45:13 :::