Gujarat High Court
Sitaram Sugars And Alllied Industries ... vs State Of Gujarat on 7 May, 2018
Equivalent citations: AIR 2018 GUJARAT 131, AIRONLINE 2018 GUJ 25
Author: Rajesh H.Shukla
Bench: Rajesh H.Shukla
C/SCA/17536/2016 JUDGMENT
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 17536 of 2016
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR.JUSTICE RAJESH H.SHUKLA : Sd/
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1 Whether Reporters of Local Papers may be NO
allowed to see the judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the
fair copy of the judgment ? NO
4 Whether this case involves a substantial
question of law as to the interpretation
of the Constitution of India or any NO
order made thereunder ?
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SITARAM SUGARS AND ALLLIED INDUSTRIES LTD.
Versus
STATE OF GUJARAT
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Appearance:
MR MIHIR THAKORE, Sr. Adv. with MS MO NARSINGHANI(3849)
for the PETITIONER(s) No. 1
MS ASMITA PATEL AGP(1) for the RESPONDENT(s) No. 1,2,3
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CORAM: HONOURABLE MR.JUSTICE RAJESH H.SHUKLA
Date : 07/05/2018
ORAL JUDGMENT
1. The present petition is filed by the petitioner under Articles 14, 19(1)(g) and 226 of the Constitution of India as well as under the Sugarcane Act, 1934 and Sugarcane (Control) Order, 1966 and also under the Essential Commodities Act, Page 1 of 23 C/SCA/17536/2016 JUDGMENT (10 of 1955) for the prayers that appropriate writ, order or direction may be issued directing the respondent authority to issue necessary permission or the license to the petitioner to start factory for sugarcane crushing operations for the year 201617. It is also prayed that the authority may be directed to issue "No Objection Certificate" to the Director of Sugar, New Delhi for transferring IEM No.438 (1993) with Plant code No.43101 under the short name LADHOL in the name of the petitioner - Company.
2. The facts of the case briefly summarized are as follows: 2.1 The Sardar Cooperative Sugar Industries Ltd., Ladhol, Taluka : Bodeli, District :
Chhota Udepur (Vadodara) took loan from the Baroda Central Cooperative Bank Ltd., Vadodara. The said loan was not repaid within the stipulated time and, therefore, the bank filed Arbitration Case No.840/2004 under Section 96 of the Gujarat Cooperative Societies Act, 1961. As the Society failed to repay the amount, the order of attachment came to be passed attaching the properties Page 2 of 23 C/SCA/17536/2016 JUDGMENT and the advertisement was issued for the auction of the properties, wherein the petitioner herein participated in the auction and was the highest bidder and though the bid is accepted, necessary permission/ license has not been issued. 2.2 It is the case of the petitioner that there was other litigations as the Bank had filed earlier Special Civil Application No.8597/2012 and Revision Application No.55/2013 also came to be filed by the District Registrar, Cooperative Society before the State Government for cancellation of the auction sale. The Revision Application was admitted and the status quo was granted, which was challenged by the Bank by way of Special Civil Application No.9739/2013. It is the case of the petitioner that during the course of the said petition, there was allegation with regard to the valuation of the property and the High Court vide order dated 18.09.2013 directed the GITCO to carry out the valuation of the properties and, thereafter, Page 3 of 23 C/SCA/17536/2016 JUDGMENT the order was passed with consensus of the parties and Sale Committee of three Officers was constituted. Thereafter the auction was carried out and the report was submitted. It is the case of the petitioner that the present petitioner was the highest bidders as no other came forward to take part in the auction and, therefore, it has attained the finality. Therefore, it is the case of the petitioner that the petitioner, who is the purchaser in the auction, would be entitled to make claim qua the property as stated in detail. The sale deed also has been executed and possession of the dispute property has also been handed over to the petitioner and huge amount of Rs.33,23,13,760/ has been invested by the petitioner. It is the case of the petitioner that the sale deed is executed, for which, stamp duty has also been paid and thus, additional expenditure for stamp duty as well as repairing of maintaining of machinery and/or payment of taxes etc. has been incurred to unable the petitioner to carry on business. However, Page 4 of 23 C/SCA/17536/2016 JUDGMENT due to non issuance of the NOC as stated above, the petitioner is unable to carry on business and also enable to get loan for working capital for providing seeds to the farmers, which has led to filing of the present petition.
2.3 It is also stated that as the Sub Registrar, Chhota Udepur refused to register the sale deed dated 28.04.2014 executed in favour of the petitioner by the bank, Special Civil Application No.8436/2015 was filed challenging such order of the Sub Registrar, Chhota Udepur and the High Court (Coram :
N.V. Anjaria, J.) allowed the said petition vide order dated 18.09.2015 at AnnexureG. Thereafter as the order was not implemented, Misc. Civil Application No.3108/2015 for contempt was filed, which was disposed of by the Hon'ble Division Bench. It is, therefore, contended that the petitioner has sought permission for crushing sugarcane for the year 201617 but for the reasons best known to the respondent authority, the authority is not taking any decision though Page 5 of 23 C/SCA/17536/2016 JUDGMENT season has already started. Further the petitioner had requested the respondent authority to issue "No Objection Certificate" as asked by the Director of Sugar, New Delhi so that IEM No.438 (1993) with Plant Code No.43101 can be transferred in the name of the petitioner, which has not done and, therefore, harassment is caused to the petitioner, which has led to filing of the present petition.
3. Heard learned Senior Counsel, Shri Mihir Thakore appearing with learned advocate, Ms. Narsinghani for the petitioner and learned AGP Ms. Asmita Patel for the respondents.
4. Learned Senior Counsel, Shri Mihir Thakore referred to the papers and pointedly referred to the order passed in Special Civil Application No.9726/2013 dated 05.12.2013 by the High Court (Coram : A.J. Desai, J.) produced at AnnexureB and submitted that the direction was issued for the auction sale and in pursuance thereto, advertisement was published. He also referred to another order dated 26.12.2013 passed by the High Court (Coram : A.J. Desai, J.) at AnnexureC and Page 6 of 23 C/SCA/17536/2016 JUDGMENT submitted that offer of the petitioner was highest, which attained the finality as nobody had offered. Learned Senior Counsel, Shri Mihir Thakore submitted that as observed in the order dated 26.12.2013, the petitioner was required to deposit the amount with the petitioner - bank before the next returnable date, however under misconception, though the demand draft was kept ready, it was not deposited due to such misconception/ misunderstanding. Learned Senior Counsel, Shri Mihir Thakore submitted that therefore stand of the Government is that it is not fulfillment of the order. Learned Senior Counsel, Shri Mihir Thakore submitted that Letters Patent Appeal No.1174/2014 came to be filed by the State challenging the order of the learned Single Judge directing to accept the demand draft. Learned Senior Counsel, Shri Mihir Thakore submitted that the issue is now sought to be raised regarding the precedence of the dues of the State or the sovereign debt contending that it will have priority over the secured creditor or the amount deposited. Learned Senior Counsel, Shri Mihir Thakore referred to the papers and also the Page 7 of 23 C/SCA/17536/2016 JUDGMENT sale certificate produced at AnnexureE. Learned Senior Counsel, Shri Mihir Thakore has also referred to the order at AnnexureG in Special Civil Application No.8436/2015 with Special Civil Application No.9326/2015 dated 18.09.2015 and submitted that the petition was allowed and the order of the Sub Registrar refusing to register the document was quashed and set aside. Learned Senior Counsel, Shri Mihir Thakore also referred to this order and submitted that as observed in the order itself, "consequence shall follow", necessary steps would have been taken in compliance with the order of the High Court, however, same has not been followed and the contempts proceedings were disposed of. He submitted that therefore a letter dated 03.12.2014 was addressed to the Director, Ministry of Food and Consumer Affairs, Krishi Bhavan, New Delhi with a request to issue IEM in the name of "Sitaram Sugars and Allied Industries Ltd." He also submitted that another letter was also addressed dated 05.12.2014 for transferring IEM No.438 (1993) with Plant Code No.43101 in favour of the petitioner. Learned Senior Counsel, Shri Page 8 of 23 C/SCA/17536/2016 JUDGMENT Mihir Thakore submitted that the permission was granted vide letter dated 30.12.2014 by the Director of Sugar, Gandhinagar, which was carried by way of Appeal No.1376/2016 challenging the order of the learned Single Judge granting permission. Therefore, learned Senior Counsel, Shri Mihir Thakore submitted that as it is evident from the record, the petitioner who is purchaser at auction, ought to have been granted necessary permission/ license. He emphasized that Section 6 of the Sugarcane (Control) Order, 1966 provides for the procedure regarding the registration and discharge of the duty. Learned Senior Counsel, Shri Mihir Thakore, therefore, submitted that after it has been purchased at the bid, the petitioner was required to carry on activity, for which, the license was required and same has not been issued with further details as to how, delay could lead to incur cost. Learned Senior Counsel, Shri Mihir Thakore submitted that inspite of these efforts, every effort is without any result and, therefore, the petition may be allowed.
5. Learned Senior Counsel, Shri Mihir Thakore submitted that after the property is purchased in Page 9 of 23 C/SCA/17536/2016 JUDGMENT auction, sale deed is executed and there is no justification for any such ground or grievance. He, therefore, submitted that appropriate order may be passed.
6. Learned AGP Ms. Asmita Patel referred to the papers and also terms and conditions for the auction. Learned AGP Ms. Patel tried to emphasis that the petitioner has purchased the property in auction and, therefore, when the property is purchased in auction, the petitioner has to get fresh license and permission to start factory for sugarcane crushing operations. She also referred to the papers and the sale deed and submitted that erstwhile Company had defaulted and, therefore, what is being sold in an auction is the property as it is also stated in the sale deed. Therefore, learned AGP Ms. Patel submitted that the petitioner had purchased the movable and immovable property but to run sugarcane factory or to do any other activity, the license may be required to be taken. Learned AGP Ms. Patel submitted that as it is the sale of movable and immovable property on "as is where is basis" as referred to and the petitioner has purchased with an open eye and, Page 10 of 23 C/SCA/17536/2016 JUDGMENT therefore any such grievance made, may not be accepted. Learned AGP Ms. Patel submitted that the petitioner has to obtain license and transfer IEM No.438 (1993) with Plant code No.43101 afresh after following procedure with the authority and the State Government has no say. He, therefore, submitted that the petitioner has to approach the authority like the Director of Sugar and get the NOC or the fresh license. Learned AGP Ms. Patel has also referred to and relied upon the judgment of the Hon'ble Apex Court in case of Rajasthan State Industrial Development and Investment Corporation & Anr. Vs. Diamond & Gem Development Corporation Ltd. & Anr., reported in (2013) 5 SCC 470, more particularly, Paragraph Nos.23 and 25.
7. Learned AGP Ms. Patel submitted that as the dues of the State Government are outstanding, NOC is not given. She submitted that if the NOC is given by the State Government, IEM No.438 (1993) with Plant Code No.43101 may not be given by the Union of India and, therefore, such petition is filed. She submitted that the Union of India is the real authority to give IEM number and Plant Code and the present petition is misconceived. Page 11 of 23
C/SCA/17536/2016 JUDGMENT
8. Learned Senior Counsel, Shri Mihir Thakore in rejoinder submitted that as it is evident from the record, the petitioner had to pursue the litigation though the petitioner had purchased in auction. He submitted that huge investment has been made and, thereafter, the petitioner is not able to run the factory. He pointedly referred to the communication of the Director of Sugar, Gandhinagar dated 30.12.2014 and submitted that the permission was granted for the year 201415. Learned Senior Counsel, Shri Mihir Thakore submitted that therefore once the permission has been granted on earlier occasion, the submission made by learned AGP that it is only a purchase of the assets on as is where it basis, is misconceived. He pointedly referred to other communication dated 30.12.2014 and submitted that the conditions also specifically mention that erstwhile Sardar Cooperative Sugar Industries Ltd. (in liquidation) is having plant code and IEM number and, therefore, the petitioner is required to comply with necessary requirement of Sugarcane (Control) Order, 1966 for running factory. He submitted that against the order of the learned Page 12 of 23 C/SCA/17536/2016 JUDGMENT Single Judge granting such permission, Letters Patent Appeal No.1376/2017 was preferred. Therefore learned Senior Counsel, Shri Mihir Thakore submitted that the present petition may be allowed as it would cause prejudice to the rights of the petitioner, who has made huge investment and if he is not allowed to carry on factory for sugarcane, it would cause irreparable loss. Learned Senior Counsel, Shri Mihir Thakore also referred to Section 6 of the Sugarcane (Control) Order, 1966 and submitted that power to regulate the distribution and movement of the sugarcane are with the authority and, therefore, permission as prayed for may be granted and appropriate direction may be issued.
9. In view of the rival submissions, it is required to be considered whether the present petition deserves consideration.
10. As could be seen from the background of the facts that Sardar Cooperative Sugar Industries Ltd., Ladhol, Taluka : Bodeli, District : Chhota Udepur (Vadodara) had taken advances from the Baroda Central Cooperative Bank Ltd., Vadodara and as the same could not be repaid, it was subject matter of Page 13 of 23 C/SCA/17536/2016 JUDGMENT Lawad Suit and, thereafter in exercise of power under the Cooperatives Act read with Rules, the possession of the property of the said Sardar Cooperative Sugar Industries Ltd., Ladhol, Taluka : Bodeli, District : Chhota Udepur (Vadodara) was attached and, thereafter, put to auction. There is a reference to earlier litigation and fact remains that the petitioner was the highest bidder and as there was no other bidder, the bid was accepted. Thereafter, the deed of conveyance has also been executed, sale certificate has also been issued and there was also litigation culminated into dismissal of Letters Patent Appeal No.24/2016.
11. It is in this background, the issue involved in the present petition requires examination as necessary permissions have been required for the purpose of running such factory like consent of the Gujarat Pollution Control Board, the license for the possession and sale of molasses, the electricity connection etc. Further the procedure as required for getting necessary permission ha been complied with, however, the permission to start crushing of the sugarcane for manufacturing Page 14 of 23 C/SCA/17536/2016 JUDGMENT of sugar is required and Industrial Entrepreneur Memorandum i.e. IEM is not transferred in the name of the petitioner, which is required for the purpose of crushing sugarcane for manufacturing of sugar. It is not the case of the respondent - State that private entrepreneur cannot undertake manufacturing activity of sugar. As it is reflected from the record, there are other private Companies or factories of sugar as permitted to do so. Therefore in light of the judgment of the Court particularly the Hon'ble Division Bench of this Court, when the petitioner has been granted permission for crushing sugarcane for the season 201415, there is no reason or justification to decline any such permission. As it is reflected from the background and the record, for one reason or other, the petitioner had to face hurdle though the petitioner is the auction purchaser with highest bid. Now the novel contentions which is sought to be raised that what was sold in the auction is the property or the assets for running factory for the purpose of crushing sugarcane to manufacture sugar and necessary permission or IEM is required to be obtained fresh, is only an Page 15 of 23 C/SCA/17536/2016 JUDGMENT hurdle, which is sought to be created for whatever reason. The State Government itself having granted permission for the year 201415 with specific reference in the conditions that as Sardar Cooperative Sugar Industries Ltd. was already having license, such permission to crush sugarcane for manufacturing sugar is granted, there is no justification now to raise such contention and thereby cause prejudice to the rights of the petitioner, who have invested huge amount. If such attitude is permitted, it would cause prejudice and may have a serious economic repercussion for the petitioner. Therefore, when the State Government has exercised the discretion and granted permission for crushing with various conditions vide order dated 30.12.2014, there is no justification for such stand that it was only sale of the asset on as is where is basis and for running factory, necessary permission including EIM has to be obtained afresh. It is required to be stated that on one hand, the State has been claiming economic development and friendly environment for the industries and such attitude is contrary to its own policy. Reference could be Page 16 of 23 C/SCA/17536/2016 JUDGMENT made to the detailed order passed in the present petition by the High Court (Coram : R.M. Chhaya, J.) dated 02.12.2016 granting similar permission for the season 201617 and inspite of that, either NOC is not granted by the authority at New Delhi or the Director of Sugar, Gandhinagar. Therefore, the present petition has been pressed for hearing as the season has started. Therefore in light of the aforesaid discussion and particularly when the State Government has itself granted necessary permission vide order dated 30.12.2014, there is no justification to decline any such prayer.
12. Moreover as pointed out by learned Senior Counsel, Shri Mihir Thakore referring to the communication from the Government of India, Ministry of Consumer Affairs, Food and PD Department of Food and PD dated 17.10.2014, it has clearly requested the State Government to furnish the details. The State Government in Agriculture and Cooperation Department vide order dated 01.12.2014 has clarified that the property in question was not taken over under the SARFAESI Act. However in the said communication, it is also stated, "I also kindly draw your attention the Page 17 of 23 C/SCA/17536/2016 JUDGMENT Government dues of Rs.7410.00 Lakhs is outstanding. The Special Civil Application No. 9739/2013 is still pending before the High Court of Gujarat."
13. Thus it appears that the attitude is because of the outstanding dues. At the same time, communication from the office of the Director, Sugar dated 15.05.2017, which has reference to EIM and the procedure to be followed and the sale of Sardar Cooperative Sugar Industries Ltd., clearly reflects that the outstanding dues of the bank and the outstanding claim or the dues of the State Government has resulted into such delay and some kind of obstruction. However as could be seen from this policy as well as conflicting the claim of the Cooperative Bank, which has sold Sardar Cooperative Sugar Industries Ltd. by auction to realize the amount on one hand and the outstanding dues of the State Government referred to their inter se dispute or conflict of the claims. However for that, auction purchaser, who has purchased the factory with huge investment seeking permission to crush the sugarcane for manufacturing the sugar, cannot be declined the Page 18 of 23 C/SCA/17536/2016 JUDGMENT permission or made to suffer. In fact, as record reveals, earlier on two occasions, permissions have been granted including vide order dated 02.12.2016 by the High Court (Coram : R.M. Chhaya, J.), permission was granted for the year 201617. It appears that inspite of that, it has not been permitted effectively, which has led to hearing of this matter. The policy which has been referred to, does not prohibit the private entrepreneur. Rule 6B of the Sugarcane (Control) Order, 1966, reads as under : 6B. Requirements for filing the Industrial Entrepreneur Memorandum.
(1) Before filing the Industrial Entrepreneur Memorandum with the Central Government, the concerned person shall obtain a certificate from the Cane Commissioner or Director (Sugar) or Specified Authority of the concerned State Government that the distance between the site where he proposes to set up sugar factory and adjacent existing sugar factories and new sugar factories is not less than the minimum distance prescribed by the Central Government or the State Government, as the case may be, and Page 19 of 23 C/SCA/17536/2016 JUDGMENT the concerned person shall file the Industrial Entrepreneur Memorandum with the Central Government within one month of issue of such certificate failing which validity of the certificate shall expire.
(2) After filing the Industrial
Entrepreneur Memorandum, the
concerned person shall submit a
performance guarantee of rupees one crore to Chief Director (Sugar), Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution within thirty days of filing the Industrial Entrepreneur Memorandum as a surety for implementation of the Industrial Entrepreneur Memorandum within the stipulated time or extended time as specified in Clause 6C failing which Industrial Entrepreneur Memorandum shall stand derecognized as far as provisions of this Order are concerned.
14. Thus it suggests that the Director of Sugar has to grant permission to set up factory after verification about the existing sugar factory or when new sugar factory is to be set up, some minimum distance prescribed by the Government is maintained. Learned Senior advocate has stated Page 20 of 23 C/SCA/17536/2016 JUDGMENT that since it has purchased sugar factory, it would be an existing sugar factory and when all permissions have been granted, there is no justification for now claiming that fresh permission is required. Rule 7 of the Sugarcane (Control) Order, 1966 has a reference to, "Power to license power crushers, khandsari units and crushers and to regulate the purchase of sugarcane."
15. It refers to the power of the Central Government to regulate by an order. For the activity of such sugarcane crushing, it could impose condition in public interest. Therefore another facet though it has not been much emphasized, but real reason is the outstanding dues of the State Government. As discussed above, it is of conflicting claim between the State Government and the Baroda Central Cooperative Bank Ltd., Vadodara, permission is denied. However it is for them to sort out the issue and it cannot be a ground to cause cause hurdle for the petitioner, who is bonafide purchaser in auction and is entitled to carry on activity of sugarcane crushing. It is required to be stated that there is no policy, for which, such private builders or the private Page 21 of 23 C/SCA/17536/2016 JUDGMENT company is prohibited from undertaking sugarcane crushing for manufacturing of sugar. The District Cooperative, Baroda has sold the property on as is where is basis in an auction, which is purchased by the petitioner. If the respondentState had any reservation, it could have been objected even the sale of the unit. However having not done so, it is not now open to contend that what was sold in an auction was the only assets and, therefore, it is not an existing unit, meaning thereby, it would require fresh permission. Again as it is evident from the communication from the Government of India, Ministry of Consumer Affairs, Food and PD Department of Food and PD, they had requested views of the Government and unit has not been sold pursuant to in exercise of power under the SARFAESI Act. Therefore it is stated that it is required to be granted necessary permission to enable the petitioner to get necessary IEM No.438 (1993) with Plant Code No.43101. In the circumstances, both the units as well as the State Government are obliged to grant necessary permission and, therefore, the present petition deserves to be allowed.
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16. In the circumstances, the present petition stands allowed. The respondent authority is directed to grant necessary NOC as asked by the Director of Sugar, New Delhi for transferring IEM No.438 (1993) with Plant Code No.43101 under the short name LADHOL in the name of the petitioner - Company. The respondent authority is also directed to issue necessary license and/or permission to the petitioner to start factory for crushing of the sugarcane for manufacturing of sugar and undertake such crushing operation for the year 201617. The respondent authority shall also pass necessary order granting permission in favour of the petitioner within a period of four weeks subject to compliance of the procedural requirement or the formalities. Rule is made absolute to the aforesaid extent.
Sd/ (RAJESH H.SHUKLA, J.) Gautam Page 23 of 23