M-S. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF UTTARANCHAL AND ORS

Citation: [2007] 10 S.C.R. 199

Court: Supreme Court of India

Bench: C.K. THAKKER, ALTAMAS KABIR

Case summary

M-S. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF UTTARANCHAL AND ORS.pdf

Judgment text

f MIS. DHAMPUR SUGAR (KASHIPUR) LTD. y v. STATE OF UTTARANCHAL AND ORS. SEPTEMBER 21, 2007 [C. K. THAKKER AND ALTAMAS KABIR, JJ. ] Administrative Law: Sugarcane (Control) Order, 1966; Clauses 3, 4, 6, 7and11/Uttar Pradesh Sugar Cane (Regulation ofSupply and Purchase) Act, 1953; Clauses 3, 4, 6 and 7and Ss. 12, 14 and 15: Sugar Policy-Authorities rejecting the application for grant of Licence filed by respondent No. 4-Manufacturer of rah from sugarcane-State Government modified the policy relaxing certain limitations-Fresh applicationfiled by the respondent was allowed by the Licensing Authority-Challenged by appellant-manufacturer of Sugar on groundthat the Unit ofrespondentfell in reservedarea where his Sugar mill is located-Dismissedby High Court-On appeal, Held: Grant ofLicence is 'rule' andrejection 'exception '-Since the policy was modified, grant ofLicence to respondent No.

4 by imposing several conditions by the authority could not be objected by the appellant- By imposing conditions, Authorities have protected interests ofall parties/Sugar manufacturers-Neither statutory provisions violated nor Policy guidelines were infringed-Authorities as well as the >-• Government after satisfying themselves that the new Unit of the respondent would not affect adequate supply ofSugar to appellant's Sugar mill-Then only exercise power ofrelaxation and granted Licence-Authorities grantedLicence in terms ofprovisions ofLaw- The Order was confirmed by the State Government-The Order so confirmed by the State Government is final -Thus, statutory finality is attached to the Order-Though, such a statutory finality does not oust the jurisdiction of the High Court /Supreme Court-But by exercising such power, High Court/Supreme Court wouldnot substitute its own decisionfor th~ decision taken by the authorities, which isfinal under the relevant law-Once it is held that the Government has power toframe andreframe; charge/recharge, such action cannot be declared illegal, arbitrary or ultra vires the Constitution-Allegations ofmala fide by appellant raises a question offact, therefore, should be supported by material particulars -In the instant case, no such material has been placed on record-Hence the contention ofmala fide, as alleged by the appellant, cannot be upheld--High Court was right in dismissing the petition ofthe appellant by observing that the change ofPolicy was not limited to the case ofrespondent No.

4 in granting Licence since it was applied uniformly to one andall--Hence, on the facts and in the circumstances ofthe case, High Court was right in not interfering with the order passed by the authorities and as confirmed by the State Government-Essential Commodities Act, 1955-S. 3-Gur (Regulations ofUse) Order, 1968; Clause 3. Constitution ofIndia, 1950; Articles 136 or 226: Grant ofLicence to respondent No. 4-manufacturer ofrah from sugarcane-Interest ofapplicant-manufacturer ofsugar-Effecton- Held: It is a question offact, which could be raised by the appellant before the authorities-It cannot be decided in proceedings under Article 136 or Article 226 ofthe Constitution. Words and Phrases: 'Sugar cane '-Meaning ofin the context ofS 2(b) ofthe Essential Commodities Act, 1955_ 'Controlled industries '-Meaning of in the context of the Industries (Development and Regulation) Act, 1951.

'Factory', Khandsari sugar', Khandsari unit', 'Crusher', 'Power Crusher', 'Procedure of Khandsari sugar' and 'Reserved area'- Meaning ofin the context ofSugar cane (Control) Order, 1966. 'Assigned area '-Meaning ofin the context ofthe Licensing Order, )' 196? AppcHant-Company is engaged in the manufacture, sale and supply ofsugar. One Mis. Indian Glycols Limited-respondent no. 4 M/S. DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF 201 UTTARANCHAL submitted an application for grant of licence for Power Driven y Crusher to start a new Unit for the manufacture of rah from sugarcane. The application was rejected by the authorities. The State Governmentvide its order dated Novemher 15, 2003 modified its earlier sugar policy empowering the Government to relax the limitation laid down in para (ka) ofthe Government Order in certain cases. Respondent No.

4 submitted a fresh application for grant of licence for rah manufacturing unit, which was allowed by the Licencing Authority observing that the new unit of respondent No. 4 would not adversely affect adequate and sufficient supplies of sugarcane to the sugar mills of the appellant in the reserved area and hence, limitation in para (ka) could be relaxed to grant the Licence to respondent No. 4. Appellant challenged the order ofthe Licencing authority by filing a writ petition in the High Court, which was dismissed by the High Court inter alia holding that all the contentions raised by the appellant were ill-founded. Hence the ID present appeal. Appellant contended that the change in licencing policy effected by the Authorities was arbitrary, unreasonable and contrary to law; that no licence could have been granted to respondent No.

4- and the said action of the authorities was malafide and had been taken by then in colourable exercise of power with a view to extend undeserving benefit to respondent No. 4; that the High Court was wholly in error in dismissing the petition filed by the appellant on the ground that the entire sugarcane produced in the reserved area ofsugar factory ofthe appellantwas available and no prejudice would be caused to it; that moreover, under 1961 Act, the Authorities were obliged to consider as to whether relaxation of conditions were necessary and expedient in 'public interest'. Since, there is no such satisfaction which is reflected in the order, there is total nonapplicatiou of mind on the part of the authorities and the order is liable to be quashed; and that the authorities considered availability ofsugarcane in the 'whole State' as against availability ofsugarcane in the' reserved area'.

What was relevant was not availability of sugarcane in the State, but availability in the reserved areas which was material. Ifthe said fact is considered, it is clearly established ' that though the appellant was in need of much more quantity of sugarcane, it was not made available and the appellant had to close ~ down certain units due to non-availability ofsugarcane. Respondent-State submitted that in accordance with the changed policy ofthe State Government, respondent No. 4 applied for licence, which was granted and there is no illegality therein; that all actions were taken by the Authorities after considering the relevant laws applicable to the case on hand and a decision was taken; that in the order issued in favour of respondent No. 4, it was expressly stated that the unit ofrespondent No.

4 will not purchase 'bonded cane'; that there would be no possibility ofadverse effect of cane supply to the sugar mill of the appellant; that so far as availability ofsugarcane to appellant-Company is concerned, it is ensured that there is no violation ofany provision oflaw on the basis ofwhich appellant can object grant oflicence in its favour; that a condition has been imposed that respondent No. 4 has to cater its need without disturbing and/or curtailing sugarcane supply to the appellant-Company. Precisely because ofthat condition, respondent No. 4 was allowed to purchase sugarcane from other areas; that correct reading ofrelevant provisions of1961 Act clearly indicate that normally licence should be granted unless a finding is recorded that it would not be in public interest to grant such licence. No such finding has been recorded and it could not be said that grant of licence to respondent No.

4, had adversely affected public interest;· and that ifby taking into consideration all the facts and circumstances in their entirety, the relevant provisions oflaw and change ofpolicy, a licence is granted by the authorities in favour ofrespondent No. 4 ~• without disturbing supply ofsugarcane to the appellant, it cannot be said that the action taken by respondent-Authorities was illegal, unlawful or otherwise objectionable. Dismissing the appeal, the Court HELD: 1. l. 'Sugarcane' is an essential commodity as defined in Section 2(b) ofthe Essential Commodities Act, 1955. r [Para 10] [215-E) Ch. Tika Ramji & Ors. etc. v. State of Uttar Pradesh & Ors. , [1956] 1SCR393: AIR (1956) SC 676 and A. K. Jain v. Union of ~- MIS. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF 203 UTIARANCHAL India & Ors. , [1970) 1SCR673: AIR (1970) SC 267, relied on. 1. 2. The Industries (Development and Regulation) Act, 1951 declared certain industries as controlled industries.

Section 2 ofthe said Act enacts that it is expedient in the public interest that the Union should take under its control, the industries specified in the First Schedule. The First Schedule, inter alia, included 'sugar' industry as one ofthe controlled industries. [Para 11] [215-H; 216-A-B] Mis. Triveni Engineering Works Ltd. &Anr. v. Union ofIndia & Ors. , AIR (1996) All 420, referred to. 2. 1. No manufacturer, without obtaining from the licensing authority a licence in the prescribed form, can undertake or carry on any process concerned with the manufacture of khandsari sugar by means ofa power crusher, bel or centrifugal. [Para 13) [219-D) 2. 2.

An application for the grant of licence by the licensing authority cannot be rejected except where (i) such application has not been made in the prescribed form, or (ii) is incomplete, or (iii) is not accompanied with the payment of requisite f~e, or (iv) the licensing authority is ofthe opinion that it is necessary or expedient so to do in the public interest. The Licensing Authority is also enjoined to take into consideration the directions of the State Government issued from time to time. The provision also keeps in view principles of natural justice and expressly states that no application for grant of licence can be rejected without giving the applicant reasonable opportunity of being heard. Sub-clause (5) of Clause 3 confers a right of appeal on the aggrieved applicant and makes the decision ofthe State Government on such appeal final. [Para 14) [220-A-B-C] 3. 1.

The High Court was right in considering the facts and circumstances in their entirety and in holding that the action of respondent Nos. 1 to 3 could not be said to be illegal or otherwise objectionable. It is, no doubt, true that earlier an application made by respondent No. 4came to be rejected but it was because of the policy then in force. Since the policy was thereafter changed, grant of licence in favour of respondent No. 4 could not be objected by the appellant. (Para 23] [226-E-F] 3. 2. From the conditions, so imposed by the authorities in granting Licence to respondent No. 4, it is abundantly clearthat the authorities have protected interests of all parties. So far as the appellant is concerned, condition No. 3 expressly states that the unit of respondent No. 4 shall purchase additional balance cane other than bonded cane from the reserved area ofthe sugar mills of the State. It further stated that "thereshall be no permission to purchase bonded cane".

Cane producers were also protected by imposing a condition on the respondent No. 4 that "the cane price to be paid by the Unit shall not be less than Minimum Statutory Price fixed by the Government oflndia". Probably, taking into account the aforesaid situation and interest of all concerned, the crushing capacity of • respondent No. 4's Unit was made limited to 1250 CTT. The authorities also considered the overall industrial growth and in condition No. 5 it was stated that "prior to 2004-05 crushing season, the Unit shall take action to produce additional cane and do development as per undertaking given in the application". [Para 25] (227-C-D-E-F] 3. 3. The respondents are also right in submitting that subsection (3) ofSection 4 ofU. P. Sugar cane (Purchase Tax) Act, 1961 as also sub-clause (4) of Clause 3 of the Licensing Order, 1967 require the Licensing Authority not to reject application for grant or renewal of licence unless the conditions laid down therein are satisfied.

The respondents, therefore, rightly urged that grant of licence is 'rule' and rejection 'exception'. If keeping in view the provisions of law, the power has been exercised by the Licensing Authority by granting licence in favour of respondent No. 4, and confirmed by the State Government and the High Court did not consider the case to interfere with the exercise ofpower by Statutory Authorities, no grievance can be made by the appellant that the High Court Committed an error oflaw or ofjurisdiction which deserves interference by this Court in exercise ofpower under Article 136 of the Constitution. [Para 26] [226-A-B; 227-G-H] 3. 4. The High Court is right in holding that whether or not the sugar factory of the appellant has been adversely affected is ~ MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 205 UTTARANCHAL essentially a question of fact.

Such question can be raised by the y appellant before the Authorities under the Act, and it cannot be decided in proceedings under Article 226 or Article 136 of the Constitution. [Para 27] [228-B-C-D] 3. 5. Neither statutory provisions were violated nor policy guidelines were infringed. By adhering to provisions ofsubstantive laws as also delegated legislation, ifthe Authorities had taken into consideration that the farmers would have one more option to get their crops sold at an appropriate price, it cannot successfully be contended that such consideration was irrelevant, extraneous or otherwise unreasonable. On the contrary, one ofthe considerations which must be kept in mind by the Authorities while exercising poweni under various provisions oflaw would be as to whether exercise of such power would also protect interest ofsugarcane growers. In the case on hand, that is precisely done by the respondent-authorities and no infirmity is found therein. [Para 29] [228-F-G-H; 229-A] 4. 1.

It is not in dispute that the proposed site ofthe new unit o,f respondent No. 4 falls in the reserved area ofthe Sugar Mill ofthe appellant. But both the Sugar Commissioner as well as the Government were satisfied that the new Unit will not affect adequat~ supply of sugarcane to Appellant's Sugar Mill and on such satisfaction, the power ofrelaxation under clause (a) ofPara-1 was exercised. Moreover, a specific condition was imposed on the respondent No. 4 that it would not purchase bonded cane ofthe Sugar .. Mills of the State. The High Court, taking note of all these :1safeguards upheld the order of the authorities and no illegality is found therein. [Para 32] [229-F-G] I 4. 2. It is clear from the order passed by the Sugarcane Commissioner and by the State Government that the Unit bf respondent No. 4 is not given any specific reserved area earmark~d for any specific sugar factory and it can purchase sugarcane from -f reserved/assigned area ofany sugar factory in the State.

But even otherwise, in view of additional condition No. 3 imposed ~n respondent No. 4, the appellant is not adversely affected by grant oflicence in favour of respondent No. 4. The said condition allows the Unit to purchase 'other than bonded cane'. lfit is so, no prejudice ~- can be said to have been caused to the appellant. [Para 34] [230-D-E) 5. The order passed by the State Government in appeal is 'fmal'. Thus, statutory finality is attached to the order passed by the State Government. It cannot be gainsaid that such 'statutory fmality' does not oust the jurisdiction ofa High Court under Article 226/227 of the Constitution nor of this Court under Article 32/136 of the Constitution. But it is well settled thatwhile exercising extraordinary power, a High Court or this Court will be conscious and mindful of such provisions and will not substitute its decision for the decision taken by the Authority which is 'final' under the relevant law.

The respondents are right in submitting that the Original Authority as well as Appellate Authority considered the facts and circumstances iand exercised the power by granting licence to respondent No. 4 and ifthe High Court did not think it proper to interfere with such order, it cannot be said that by doing so, the High Court has failed to exercise jurisdiction or exceeded its power in dismissing the petition. [Para 36) [230-H; 231-A-B-C] 6. 1. The High Court was right in observing that this Court decided the case of Ganesh Sugar Works v. State ofHaryana in the light offact-situation before the Court. The respondents are right in submitting that even in that case, this Court has indicated that the Government ought to take into consideration interest of sugarcane growers also. In the present case, the Sugarcane Commissioner has precisely performed that function when he observed that the sugarcane growers had one more option available for realizing proper return.

Apart from the fact that it cannot be said to be an irrelevant consideration, the Authorities are enjoined to keep in view this aspect as one ofthe considerations and no infirmity is found therein. [Para 39) [233. ;E-F-GJ Shri Ganesh Sugar Works v. State o/Haryana, [1987) 4 SCC 604, referred to. 6. 2. It is also pertinent to note that when licence was granted to respondent No. 4 by the Sugarcane Commissioner for one Power Crusher ofa capacity of1250 TCD, the appellant as also respondent MIS. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF 207 UTTARANCHAL No. 4 challenged that order. The grievance ofthe appe! lantwas that no such licence could have been granted by the Sugarcane Commissioner in favour ofrespondent No. 4. The complaint made by respondent No. 4, on the other hand, was that the Licensing Authority ought to have granted licence for 1500 TCD as applied. The State Government disposed of both the matters by upholding .

B the order passed by the Sugarcane Commissionerobservingthat the action taken by the Licensing Authority could not be said to be illegal or improper. In the light of the considerations and findings by the authorities and appellate authorities, no interference with the orderwas called for and the High Courtwas right in confirming the orders passed by the Authorities. [Paras 40, 41and44] [233-H; 234-B; 235-B] 6. 3. The High Court considered the contention ofthe appellant that that Clause 3 ofthe Gur (Regulation ofUse) Order, 1968 bars· use ofgur for any purpose other than as specified in sub-clauses (a) to (c). Therefore, grant of licence by respondent Nos. 1 to 3 to respondent No. 4 for preparation ofalcoholic liquor is in violation ofthe provision oflaw and observed that the application submitted. by respondent No. 4 was limited to manufacture of rah and no use was indicated at all. From the counter-affidavit filed in the High Court, no such indication was exhibited.

But in any case, if there was violation ofprovision oflaw relating to use ofrah for a purpose other than permitted by law, the remedy was not to challenge licence but to question the use ofrab. An appropriate direction in such an eventuality can always be issued by the Authority. [Paras 45 and 46] [235~B-C-D-E] 7. 1. It is well-settled that public authorities must have libertr and freedom in framing policies. No doubt, the discretion is not absolute, unqualified, unfettered or uncanalised and judiciary has control over all executive actions. At the same time, however, it is well-established that courts are ill-equipped to deal with these matters. In complex social, economic and commercial matt~s, decisions have to be taken by governmental authorities keeping in view several factors, and it is not possible for courts to consider competing claims and conflicting interests and to conclude whichw,ay the balance tilts.

There are no objective, justiciable or manageable standards to judge the issues nor s~ch questions can be decided on -¥ 'a priori' consid~rations. (Para 48] (236-A-B-C] \ Bennett Coleman v. Union ofIndia, (1972] 2 SCC 788: AIR (1973) SC 106; State ofMaharashtra v. Lok Shiksha Sanstha, [1971] 2 SCC 410: AIR(1973); R. K. Gargv. Union ofIndia, [1981] 4 SCC 675 : AIR (1981) SC 2138 : (1982] 1 SCR 947; Liberty Oil Mills v. Union ofIndia,_ (1984] 3 SCC 465; State ofMP. v. Nandlal, (1986] 4 SCC 566: AIR (1987) SC 25: JT (1986) SC 701; Shri Sitaram Sugar Co. Ltd v. Union ofIndia, (1990] 3 SCC 223 : AIR (1990) SC 1277 : JT (1990) 1SC462; Ugar Sugar Works Ltd. v. Delhi Administration, (2001] 3 sec 635: AIR (2001) SC 1447: JT (2001) 4 SC 31, BALCO Employees' Union v. Union ofIndia, (2002] 2 SCC 333 : AIR (2002) SC 350 : JT (2001) 10 SC 466; Sangwanv. Union ofIndia, (1980] Supp SCC 559 : AIR (1981) SC 1545 and Union ofIndia v. S. L.

Dutta, (1991] 1SCC505: AIR (1991) SC 363: JT (1990) 4 SC 741, referred to. - State ofBombay v. Laxmidas Ranchhoddas, AIR (1952) Born 468, approved. Metropolis Theatre Companyv. State ofChicago, 57 L Ed. 730, referred to. ' 8. 1. It is well-settled and needs no authority for holding that every power must be exercised bonafide and in good faith. Every action of a public authority must be based on utmost good faith, genuine satisfaction and ought to be supported by reason and rationale. It is, therefore, not only thepower but the duty ofthe Court to ensure that all authorities exercise their powers properly, lawfully and in good faith. Ifpowers are exercised with oblique motive, bad faith or for extraneous or irrelevant considerations, there is no exercise ofpower known to law and the action cannot be termed as action in accordance with law. [Para 67] (243-B-C-D] General Assembly ofFree Church ofScotland v. Overtaum, (1904) AC 515 : 20 TLR 370, referred to. 8. 2.

Once it is held that the Government has power to frame and reframe, change and rechange, adjust and readjust policy, the H said action cannot be declared illegal, arbitrary or ultra vires the MIS. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF 209 UTTARANCHAL provisions of the Constitution only on the ground that the earlier y policy had been given up, changed or not adhered to. It also cannot be attacked on the plea that the earlier policy was better and suited to the prevailing situation. [Para 68) [243-E-F] •~ >! 9. 1. Allegations of ma/a fide are serious in nature and they essentially raise a question of fact. It is, therefore, necessary for the person making such allegations to supply full particulan in the petition. Ifsufficient averments and requisite materials are not on record, the court would not make 'fishing' or roving inquiry. Mere assertion, vague averment or bald statement is not enough to hold the action to be ma/a fide. It must be demonstrated by facts.

Moreover, the burden ofproving malafide is on the person levelling. such allegations and the. burden is 'very heavy'. [Para 69) [243-G-H] E. P. Royappa v. State ofTamil Nadu, [1974] 4 SCC 4: [1974] 2 SCR 348; Gulam Mustafa v. State ofMaharashtra, [1976] 1 SCC 800 : AIR (1977) SC 448 and Ajit Kumar v. Indian Oil Corporation, (2005) 7 sec 764, referred to. 9. 2. In the case on hand, except alleging that the policy was altered by the Government, to extend the benefit to respondent No~ 4, no material whatsoever has been placed on record by the appellant. Therefore, the contention of the appellant that the impugned action is malafide or malicious cannot be upheld. [Para 69] [244-B-C] t-• 9. 3. The High Court was right in observing that the change of policy was not limited to the case of respondent No. 4 but it was uniformly applied to one and all.

Therefore, it cannot be contend~d that the High Court committed an error in arriving at the sa,d conclusion which requires interference under Article 136 of the Constitution. [Para 70) [244-C-D) 9. 4. Keeping in view statutory provisions, the policy decisihn taken by the respondent-authorities and interest of all parties including existing sugar factories, a decision has been taken by the respondent Nos. 1 to 3 granting licence in favour ofrespondent No. 4. --\ A The said decision wm confirmed by the State in exercise ofappellate power and the High Court was not convinced that the decision was ~ illegal, arbitrary or otherwise unreasonable. In such circumstances, it cannot be held that all the decisions suffer from any error oflaw or ofjurisdiction and they should be set aside. [Para 71] [244-E-F] CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4425 of 2007. -From the Judgment and Order dated 23. 12. 2005 ofthe High Court ofUttaranchal at Nainital in Writ Petition No. 564 of2004(M/B).

'-1 Sudhir Chandra, Nikhil Nayyar, Dayan Krishnan, Gautam Narayan, Bhagwathi Prasad and Ankit Singal for the Appellant. Rakesh Dwivedi and Dinesh Dwivedi, Abhishek Chaudhary, Niranjana Singh, Gaurav Bhatia and D. Bharathi for the Respondents. The Judgment ofthe Court was delivered by C. K. THAKKER, J. 1. Leave granted. 2. The present appeal is filed by the ap~llant-original petitioner against the judgment and final order dated December 23, 2005 passed by the High Court ofUttranchal at Nainital in Writ Petition No. 564 of 2004 (MIB) by which the Division Bench ofthe High Court dismissed the petition filed by the vvrit-petitioner. 3.

The appellant-writ-petitioner filed a petition in the High Court of (' Uttranchal at Nainital by invoking Article 226 ofthe Constitution against + the respondents for an appropriate writ, direction or order quashing and setting aside relaxation in Clause (ka) ofNotification dated November 15, 2003 issued by the Cane Development & Sugar Industries ·Development, Government ofUttranchal, also quashing an order issuing licence for Power Crusher dated February 17, 2004 issued in favour of G respondent No. 4; as also quashing an order dated January 22, 2004 issued by Secretary (Ganna Cheeni), Government ofUttranchal. A Writ ofMandamus was also sought by the appeIIant directing respondent Nos. 1 to 3 to estimate the requirement of sugarcane of the appellant on the basis of 6250 Tonnes Crushing Capacity (TCC). A further prayer was . M/S. DHAMPURSUGAR(KASHIPUR)LTD. v.

STATEOF 211 made to quash and set aside the order dated September 25, 2004 passed y by the Government of Uttranchal dismissing the appeal filed by the appellant herein. FACTUAL MATRIX 4. To appreciate the controversy raised in the present appeal, few relevant facts may be noted. The appellant is a Company registered under · the Companies Act, 1956. It owns a sugar factory at Kashipur in the State of Uttranchal. It was set up in the year 1936. The Company is engaged in the manufacture, sale and supply ofsugar. It is the case of' the appellant that Mis Indian Glycols Limited ("IGL" for short) submitted an application in the year 2003 for grant of licence for Power Driven Crusher for the manufacture ofrah from sugarcane. The application was,' however, rejected by the Sugarcane Commissioner. According to the appellant, the Sugarcane Com.

'llissioner took the said decision as per the Licencing Policy of the Government whereunder a new licence to Khandsari Unit could not be granted in the reserved area afthe existing sugar mills. Since the application ofIGL was in the reserved area ofthe _. i.. appellant, it could not be granted. According to the appellant, however, the State Government vide its order dated November 15, 2003, modified its earlier sugar policy and the Government was empowered to relax the limitation laid down in para (ka) ofthe Government Order in certain cases'. Immediately after the amendment in the policy, IGL submitted fresh application on November 18, 2003 for grant of licence for rab manufacturing unit. IGL intended to manufacture rah from sugarcane juice. The said application was allowed by the Licencing •~- Authority, i. e. Sugarcane Commissioner by an order dated February 17, 2004. According to the appellant, the proposed site ofthe new unit of respondent No.

4-IGL fell in the reserved area of sugar mill of the appellant. No such licence, therefore, could have been granted to JG~. The Sugarcane Commissioner as well as the State Government observed that the new unit would not adversely affect adequate and sufficient -~ supplies ofsugarcane to the sugar mills in the reserved area and hence, limitation in para (ka) could be relaxed. According to the appellant, the factual position was totally ignored by respondent Nos. 1to 3 and the action was illegal, unlawful, arbitrary and ma/afide since the respondents A wanted to oblige IGL at the cost ofinterest ofthe appellant. DECISION OF HIGH COURT 5. The High Court dismissed the petition inter alia holding that all . the contentions raised by the appellant were ill-founded. According to the Court, sugarcane produced in the reserved area was available to the sugar factory.

It was also observed by the Court that as per the bonding policy, adequate supply was ensured so far as the appellant factory was concerned and hence, it had no occasion to make any grievance against grant o~li,cence in favour ofRespondent No. 4 uIGL. The Court observed that it ~~-a matter of policy and when there was change ofpolicy on the part ofthe Government in granting licence, it could not have been interfered with since the·appellant failed to convince the Court that such policy was arbitrary, unreasonable or violative ofstatutory provisions. The Court also held that under the U. P. Sugarcane (Purchase Tax) Act, 1961, grant oflicence was the rule and rejection an exception. As tlie relevant conditions of law had been observed and the application was made by respondent No. 4 for grant of licence, by allowing the application and granting licence, no illegality was committed by respondent-Authorities and such order could not be set aside.

On the basis of the above findings, the High Court dismissed the writ petition filed by the appellant. The said order passed by the High Court is challenged by the appellant by filing the present appeal. 6. On March 24, 2006, notice was issued by this Court. The matter was thereafter adjourned from time to time. Affidavits and further affidavits were filed. On December 4, 2006, the matter was ordered to be placed for hearing. On May 3, 2007, we have heard the learned counsel for the parties. CONTENTIONS OF PARTIES 7. The learned counsel for the appellant contended that the change in licencing policy effected by the Authorities was arbitraJ. y, unreasonable and contrary to law. It was submitted that no licence could have been granted to respondent. No. 4- IGL and the said action was malafide and had been taken by the authorities in colourable exercise ofpower with a view to extend undeserving benefit to IGL. It was also submitted - r M/S. DHAMPURSUGAR(KASHIPUR)LTD. v.

STATE OF 213 that the High Court was wholly in error in dismissing the petition filed by y the appellant on the ground that the entire sugarcane produced in the reserved area of sugar factory of the appellant was available and no prejudice would be caused to it It was the case ofthe appellant-Company from the beginning that in the area reserved for appellant-factory, no licence could have been granted to any other factory particularly when it had adversely affected supply ofsugarcane to the appellant-factory. The High Court was not right in holding that the appellant did not make strong demand for more than 51 lakh tones and supply ofrequisite quantity was 'y ensured. Looking to the figures supplied by the appellant, it was clearly proved that establishment of new unit of respondent No. 4 would prejudicially affect the appellant and the Company would not be able to get adequate and sufficient sugarcane from sugarcane growers.

It was urged that even ifit is assumed for the sake ofargument that policy could be changed and exemption could be granted by the authorities to any unit, such exemption and/or relaxation could not be allowed only with a view to favour a particular party and no such action could be sustained in law. On that ground also, the action is liable to be set aside. Moreover, under ,........ 1961 Act, the Authorities were obliged to consider as to whether relaxation ofconditions were necessary and expedient in 'public interest'. Since, there is no such satisfaction which is reflected in the order, there is total non-application ofmind on the part ofthe authorities and the order is liable to be quashed. According to the learned counsel, the approach of the authorities was not correct in granting licence to respondent No. 4. The authorities considered availability of sugarcane in the 'whole State' as _; against availability of sugarcane in the "area".

What was relevant was ·not availability ofsugarC;ane in the State, but availability in the respective areas which was material. If the said fact is considered, it is clearly established that though the appellant was in need ofmuch more quantity ofsugarcane, it was not made available and the appellant had to close down certain units due to non-availability ofsugarcane. Unfortunately, however, the said consideration was totally overlooked by the authorities and even the High Court did not consider that aspect in its proper perspective. On all these grounds, it was submitted that the appeal deserves to be allowed and all actions taken by the State Authorities are liable to be set aside by ordering cancellation oflicence granted in favour -- __,. _. ofrespondent No. 4-IGL. . -"( 8. The learned counsel for the respondents supported the order passed by the Authorities-respondent Nos. 1 to 3 and the decision of the High Court.

So far as the State Authorities are concerned, it was submitted that policy decisions were taken by the State from time to time as regards sugarcane policy. Earlier, as per the policy in existence, respondent Nos. 4 could not be granted licence since the object mentioned in the application was manufacture ofrab and for manufacture ofalcohol, and as per the policy, no licence could be granted for the said purpose. The application was, therefore, rejected. Thereafter the policy was changed and in accordance with the changed policy, respondent No. 4 applied for licence which was granted and there is no illegality therein. Allegations ofma/afide and/or colourable exercise ofpower on the part ofrespondent Nos. 1to 3 were emphatically denied by the respondents and it was submitted that all actions were taken by theAuthorities after considering the relevant laws applicable to the case on hand and a decision was taken. It was also submitted that in the order issued in favour of respondent No.

4-IGL, it was expressly stated that the unit (respondent No. 4) will not purchase 'bonded cane'. It was also stated that there would be no possibility ofadverse effect ofcane supply to the sugar mill of the appellant. On the contrary, one more option would be available to the farmers of cane supplied. It was thus in larger public interest, submitted the learned counsel, that such a decision was taken. The High Court was satisfied as to the legality of such action and rightly did not interfere with it in exercise ofpower ofjudicial review and no case has \. -. been made out to interfere with the said order. The appeal, therefore, deserves to be dismissed. 9. The learned counsel for respondent No. 4--IGL supported the arguments advanced by the learned counsel for the State. He further submitted that ifa licence has been granted to respondent No. 4, appellant had no ground to make grievance that no such licence could have been granted to IGL.

So far as availability ofsugarcane to appellant-Company is concerned, it is ensured. Ifit is so, no prejudice would be caused to the company. There is no violation ofany provision oflaw on the basis ofwhich appellant can object grant oflicence in favour ofrespondent No. M/S. DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF 215 4. IGL has not been given or allowed any specific area. On the contrary, Y it was expressly stated that respondent No. 4 has to cater its need without disturbing and/or curtailing sugarcane supply to the appellant-Company. Precisely because ofthat condition, respondent No: 4 was allowed to purchase sugarcane from other areas. It was also submitted that correct reading ofrelevant provisions of 1961 Act clearly indicate that normally licence should be granted unless a finding is recorded that it would not be in public interest to grant such licence. No such finding has been recorded and it could not be said that grant oflicence to respondent No.

4, had adversely affected public interest. Ifby taking into consideration all the facts and circumstances in their entirety, the relevant provisions of law and change ofpolicy, a licence is granted by the authorities in favour of respondent No. 4 without disturbing supply of sugarcane to the appellant, it cannot be said that the action taken by respondent-Authorities was illegal, unlawful or otherwise objectionable. The High Court was, therefore, fully justified in dismissing the petition and the said order requires no interference by this Court in exercise ofdiscretionary and equitable jurisdiction under Article 136 ofthe Constitution. STATUTORY SCHEME GOVERNING SUGAR AND SUGARCANE 10. Before we deal with contentions raised by the parties before us, it would be appropriate if we peruse relevant statutory provisions relating to sugar and sugarcane. 'Sugarcane' is an essential commodity as defined in Section 2(b) ofthe Essential Commodities Act, 1955. In the leading decision Ch.

Tika Ramji & Ors. etc. v. State of Uttar . Pradesh & Ors. , [1956] 1 SCR 393 : AIR (1956) SC 676, this Court held that the Essential Commodities Act included within the definition of 'essential commodity 'food-crops' which would include sugarcane. Again, in A. K. Jain v. Union ofIndia & Ors. , [1970] 1 SCR 673 : AIR (1970) SC 267, following Tika Ramji, the Court held that Section 2 of the Essential Commodities Act provided that sugarcane would be an 'essential commodity' within the meaning ofthe Act and hence cultivation and sale of sugarcane could be regulated by law. 11. The Industries (Development and Regulation) Act, 1951 declared certain industries as controlled industries. Section 2 ofthe said A Act enacts that it is expedient in the public interest that the Union should take under its control, the industries specified in the First Schedule. The First Schedule, inter alia, included 'sugar' industry as one of the controlled industries. In Mis Triveni Engineering Works Ltd & Anr.

v. Union ofIndia & Ors. , AIR [1996] All 420, the High Court ofAllahabad held that the sugar industry is a controlled industry. The Government is exercising control on the sugarcane at all levels, namely; ofproduction, distribution, pricing as also on the production and marketing offinished product of sugar: There are certain Central and State Legislations and Control Orders relating to sugar and sugarcane. The first one is the Sugarcane Act, 1934 (Act No. XV of 1934) which is a Central Act. It regulates the price ofsugarcane intended for the use ofsugar factories. It empowers the State Government to declare any area as controlled area and to fix a minimum price for purchase ofsugarcane in that area.

Section 3 ofthe Essential Commodities Act empowers the Central Government to issue orderproviding for regulating or prohibiting the production, supply and distribution ofany essential commodity ifit is ofthe opinion that it is necessary or expedient so to do for maintaining or increasing supply of any essential commodity or in securing equitable distribution and availability at fair price. In exercise ofthe said power, the Central Government framed the Sugarcane (Control) Order, 1966. Clause 2 thereofdefines important terms such as 'factory, 'khandsari sugar, 'khandsari unit', 'crusher', 'power crusher', 'producer of khandsari sugar', 'reserved area', etc. Whereas Clause 3 enables the Central Government to fix 'minimum price of sugarcane payable by producer of sugar, Clause 4 provides for minimum price ofsugarcane payable by producers ofkhandsari sugar. Clause 6 empowers the Central Government to regulate distribution and movement ofsugarcane.

The said clause is relevant and reads thus: 6. Power to regulate distribution and movement of sugarcane. -(1) The Central Government may, by order notified in the official Gazette. - (a) reserve any area where sugarcane is grown (hereinafter in this clause referred to as 'reserved area') for a factory having regard to the crushing capacity ofthe factory, the availability ofsugarcane in the reserved area and the need for production M/S. DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF 217 ofsugar, with a view to enabling the factory to purchase the quantity ofsugarcane required by it; (b) detennine the quantity ofsugarcane which a factory will require for crushing during any year; (c) fix, with respect to any specified sugarcane grower or l3 sugarcane gr?

wers generally in a reserved area, the quantity or percentage ofsugarcane grown by such grower or growers, as the case may be, which each such grower by himself, or, if he is a member ofa co-operative society ofsugarcane growers operating in the reserved area, through such society, shall supply to the factory concerned; (d) direct a sugarcane grower or a sugarcane growers' cooperative society, supplying sugarcane to a factory, and the factory concerned to enter into an agreement to supply or purchase, as the case may be, the quantity ofsugarcane fixed under paragraph (c); (e) direct that no gur Gaggery) or khandsari sugar or sugar shall be manufactured from sugarcane except under and in accordance with the conditions specified in the licence issued in this behalf; (f) prohibit or restrict or othetwise regulate the export ofsugarcane from any area (including areserved area) except under and in /1 accordance with a pennit issued in this behalf. )..

(2) Every sugarcane grower, sugarcane growers co-operative society and factory, to whom or to which an order made under Paragraph (c) ofsub-clause (l) applies, shall be bound to supply or purchase, as the case may be, that quantity of sugarcane covered by the agreement entered into under the paragraph and any willful failure on the part ofthe sugarcane grower, sugar-cane growers' co-operative society or the factory to do so, shall constitute a breach ofthe provisions ofthis Order : Provided that where the default committed by any sugarcane growers, co-operative society is due to any failure on the part of any sugarcane grower, being a memberofsuch society, such society shall not be bound to make supplies of sugarcane to the factory to the extent ofsuch default. 12. Clause 7 of the Order deals with power of the Central Government to license power crushers, khandsari units and crushers and to regulate the purchase of sugarcane.

It states that the Central Government may by order direct that in a reserved area (i) no sugarcane shall be purchased for crushing by a power crusher; (ii) no sugarcane or sugarcane jllice shall be purchased for crushing or for manufacture ofgur, shakkar, gul,jaggery, rab or khandsari sugar, as the case may be, by a crusher not belonging to a grower or a body ofgrowers ofsugarcane or by a khandsari unit in the area except under and in accordance with a permit issued by the Central Government in that behal£ Clauses 8, 9 and 9A empower the Central Government to issue directions to producers of D khandsari sugar, power crushers, khandsari units, crushers and cooperatiye societies to call for information, to enter and search any premises where any accounts, books, registers or other documents, belonging to or under the control ofa producer ofsugar or his agent, or an owner of a crusher, a power cm. sher or a khandsari.

unit or an agent of such an owner, are maintained or kept for safe custody. Clause 11 enables Central Government to delegate its powers to be exercised by any officer or authority ofthe Central Government or by State Government or any officer or authority of a State Government. The Central Government vide a notification dated July 16, 1966, delegated the powers under clauses 6, 7, 8 and 9 to the State Government. In exercise of the said power, the State of Uttar Pradesh issued U. P. Khandsari Sugar Manufacturer's Licensing Order, 1967. The Preamble ofthe order states that the power to regulate the manufacture of khandsari sugar by open pan process including bels exercisable by Central Government has been delegated to G the State Government under Sugarcane (Control) Order, 1966.

It was also stated that the State Government was of the opinion that it was necessary and expedientfor regulating manufacture ofkharidsari sugar by open pan process including bels, that in exercise ofthe delegated powers it was pleased to frame the Licensing Order, 1967. The Order defines M/S. DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF 219 relevant terms in Clause 2, such as, 'assigned area' to mean 'an area assigned to a factory under Section 15 ofthe Uttar Pradesh Sugarcane (Regulation ofSupply and Purchase) Act, 1953'; 'manufacturer' to mean 'a person who uses a power crusher, bel or centrifugal in the process of manufacture ofkhandsari sugar and includes a person who prepares rab for conversion into khandsari sugar'; 'power crusher' as 'crusher working with the aid ofdiesel, electrical or steam power and engaged or ordinarily engaged in crushing sugarcane and extracting juice therefrom for the manufacture ofgur, shakkar, gul, jaggery, rah or khandsari sugar'.

Clause 3 provides for grant oflicence. Clause 4 prescribes the period for which licences are to be issued. Clauses 6 and 7 lay down conditions for q suspension or cancellation oflicence and powers ofthe licensing authority respectively. 13. No manufacturer, without obtaining from the licensing authority a licence in the prescribed form, can undertake or carry on any process concerned with the manufacture ofkhandsari sugar by means ofa power crusher, bel or centrifugal.

Sub-clause (4) ofClause 3 is also relevant and the material part reads thus: (4) An application for the grant ofa licence shall be disposed of by the Licensing Authority expeditiously and shall not be rejected except where the application has not been made on the prescribed form or is incomplete or is not accompanied by proof of the payment ofthe requisite fee or the Licensing Authority is of the opinion that it is necessary or expedient so to do in the public interest with a view to- (a) Regulating the Khandsari Sugar Manufacturing Industry in the best interest ofthe industry; or (b) avoiding uneconomic concentration ofkhandsari units in any area; or (c) ensuring in a reserved or assigned area adequate supplies of sugarcane to a factory. Provided that... 14.

It is thus clear that an application for the grant oflicence by the -L- A licensing authority cannot be rejected except where (i) such application has not been made in the prescribed fonn, or (ii) is incomplete, or (iii) is not accompanied with the payment ofrequisite fee, or (iv) the licensing authority is ofthe opinion that it is necessary or expedient so to do in the public interest. The Licensing Authority is also enjoined to take into B consideration the directions ofthe State Government issued from time to time. The provision also keeps in view principles ofnatural justice and expressly states that no application for grant oflicence can be rejected without giving the applicant reasonable opportunity ofbeing heard. Subclause (5) ofClause 3 confers a right ofappeal on the aggrieved applicant C and makes the decision ofthe State Government on such appeal final. 15. A reference may also be made to a substantive Act, namely, the U. P.

Sugarcane (Regulation ofSupply and Purchase) Act, 1953. As stated in the Preamble, the Act has been enacted with a view "to regulate the supply and purchase ofsugarcane required for use in sugar factories D and gur, rab or khandsari manufacturing units". Section 2 ofthe said Act, inter alia, defines 'assigned area', 'cane', 'crushing season', 'factory', 'gur, rah or khandsari sugar manufacturing unit', 'reserved area', etc. Whereas Chapter II ofthe Act relates to 'Administrative Machinery', Chapter III deals with 'Supply and Purchase of Cane'. Section 12 in E Chapter III requires the occupier ofany factory to furnish in the manner prescribed, an estimate ofthe quantity ofcane which will be required by the factory during such crushing seasons as may be specified in the order. The Cane Commissioner would examine every estimate and publish the same with such modifications as he may make. Section 13 requires the ~ ......

p occupier ofa factory to maintain in·the prescribed fonn, a register ofall such cane-growers and cane-growers' co-operative Society or Societies and shall sell cane to that factory. The State Government has been granted power ofsurvey under Section 14. Section 15 is an important provision which deals with declaration of 'reserved area' and 'assigned area' and G may be quoted in extenso. 15. Declaration of reserved area and assigned area. -(l) Without prejudice to any order made under Clause (d) of subsection (2) of Section 16 of the Cane Commissioner may, after consulting the Factory and Cane-growers' Co-operative Society H ~ ~ MIS. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF 2211 UTTARANCHAL [THAl(KER, J.

] in the manner to be prescribed: v (a) reserve any area (hereinafter called the reserved area); and (b) assign any area (hereinafter called an assigned area), for the purpose ofthe supply ofcane to a factory in accordance with the provisions of Section 16 during one or more crushing seasons as may be specified and may likewise at any time cancel such order or alter the boundaries of an area so reserved or assigned. (2) Where an area has been declared as reserved area for factory, the occupier of such factory shall, ifso directed by the Cane Commissioner, purchase all the cane grown in that area, which is offered for sale to the factory. (3) Where any area has been declared as assigned area for factory, the occupier ofsuch factory shall purchase such quantity ofcane grown in that area and offered for sale to the factory as ~_i_may be determined by the Cane Commissioner.

(4) An appeal shall lie to the State Government against the order ofthe Cane Commissioner passed under sub-section (I). 16. Section 16 regulates purchase and supply ofcane in the reserved and assigned areas. It is equally important and may be reproduced: .. .... 16. Regulation ofpurchase and supply ofcane in the reserved '). and assigned areas. -(1) The State Government may, for maintaining supplies, by order, regulate- (a) the distribution, sale or purchase ofany cane in any reserved . or assigned area; and (b) purchase ofcane in any area other than a reserved or assigned area.

-{ (2) Without prejudice to the generality ofthe foregoing powers such order may provide for- (a) the quantity ofcane to be supplied by each Cane-grower or -1- Cane-growers' Co-operative Society in such area to the factory for which the area has so been reserved or assigned; (b) the manner in which cane grown in the reserved area or the assigned area, shall be purchased by the factory for which the area has been so reserved or assigned and the circumstance · in which the cane grown by a cane-grower shall not be purchased except through a Cane-growers' Co-operative Society; (c) the form and the terms and conditions ofthe agreement to be executed by the occupier or manager ofthe factory for which an area is reserved or assigned for the purchase of cane offered for sale; (d) the circumstances under which permission may be granted- (i) for the purchase ofcane grown in reserved or assigned area by a Gur, Rab or Khandsari Manufacturing Unit or any person or factory other than the factory for which area has been reserved or assigned, and (ii) for the sale ofcane grown in a reserved or assigned area to a Gur, Rab or Khandsari Manufacturing Unit or any person or factory, other than the factory for which the area is reserved or assigned; (e) such incidental and consequential matters as may appear to ....

be necessary or desirable for this purpose. ~ 17. Section 28 authorizes the State Government to make rules. 18. There is still another statute, known as the U. P. Sugarcane (Purchase Tax) Act, 1961. Section 4 thereofprovides for grant oflicence for manufacturing 'gur' or 'rah'. Sub-section (I) ofthe said ~ection states that no unit other than a unit comprising vertical crusher (urdhwa kolhu) or vertical power crusher (urdhwa shakti chalet kolhu) for manufacture of production of gur or rah by crushing sugarcane or a unit which has obtained a licence under the Uttar Pradesh Khandsari Sugar Manufacturers Licensing Order, 1967, shall, without obtaining a licence from the Sugar MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 223 Commissioner, carry on or undertake any process connected with the y manufacture or production of gur or rab.

Sub-section (3) of the said section reads as under: (3) An application for grant or renewal of a licence shall be disposed ofby the Sugar Commissioner expeditiously and shall not be rejected except where an application has not been made by the prescribed date, or in the prescribed form, or is incomplete in any respect or is not accompanied by proof of payment of the requisite fee including late fee, ifany, or the Sugar Commissioner is ofopinion that it is necessary or expedient so to do in public interest with a view- (i) in the case ofan application for grant ofa licence- (a) to regulating the manufacture ofgur or rab by units; or (b) to avoiding uneconomic concentration or units in any area; or (c) to ensuring, in reserved areas, adequate supplies of sugarcane to a factory; (ii) in the case of an application for renewal ofa licence, to regulating the manufacture ofgur or rab by units; Provided that while disposing ofthe applications for grant or renewal oflicence, the Sugar Commissioner may also take into .

>' consideration- > (a) the conduct ofthe applicant in working the unit, ifany, prior to the date ofapplication including previous conviction, ifany, for the contravention of the provisions ofthe Act, the rules made thereunder and the conditions ofthe licence; (b) the default, ifany, made by the applicant in payment ofthe dues under this Act; and --( (c) the total continuous period for which the applicant held a licence under this Act prior to the date ofapplication; Provided further that no application for renewal ofa licence _..

shall be rejected unless the applicant has been given a reasonable opportunity ofbeing heard; Provided also that where an application for grant or renewal of a licence is not disposed by the commencement of the assessment year or- (i) in the case ofan application for grant ofa licence, within three months; and · (Ii) in the case ofan application for renewal ofa licen~e, within -~ two months, ofthe date on which the application is made, whichever is later, the licence shall be deemed to have been granted or renewed, as the case may be. 19. Section 5 provides for renewal oflicence. Section 6 lays down D conditions for suspension or cancellation ofa licence. Sections 7 to 14 deal with the powers ofAuthorities under the Act. CONSIDERATION OF MERITS 20. The High Court considered the scheme of substantive laws occupying the field and also subordinate legislation, dealing with the policy relating to supply of sugarcane to the factories and stated; The U. P.

Sugarcane (Regulation ofSupply and Purchase) Act, 1953 provides a mechanism for reasonable, necessary, sufficient and continuous supply of sugarcane to the sugar factories in the crushing season, keeping in mind the interest of the sugarcane growers, cane grower's cooperative societies, sugar factories and also inter-se interest ofthe sugar factories~ The supply ofsugarcane to the sugar factories in the quantity which may be reasonably required by them for production in a particular season or seasons is to be regulated by the provisions ofthis Act. A duty has been cast upon the Sugarcane Commissioner under Sections 11, 12 & 15 ofthe U. P. Act 1953 to require the occupier of each factory to furnish in the manner and by the date specified in an order issued by the Sugarcane Commissioner, an estimate ofthe quantity of ~ MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 225 sugarcane which would be required by a factory during such 'y crushing season or seasons as may be specified in the order.

The Sugarcane Commissioner, therefore, has to issue an order by which he would make the occupier of every factory to furnish the estimated quantity ofsugarcane as per requirement ofthe sugar factory for a particular crushing season or seasons, which should be done in a manner and by the date specified by the Sugarcane Commissioner. The Sugarcane Commissioner is obliged to examine every such estimate and has the liberty to modify the same and with such modifications, ifany, the publication ofthe estimate is done for the purpose ofmaking it known to all sugar factories that the estimate prepared by them for the requisite quantity of sugarcane for a particular crushing season or seasons has been accepted by the Sugarcane Commissioner with or without modification. In case, any sugar factory is not satisfied with the estimate so modified or otherwise, it may file a revision before the prescribed authority. The State Government is the prescribed authority under Rule 23-A ofU. P.

Sugarcane (Regulation ofSupply and Purchase) Rules, 1957. The sugar factory may file a revision within fourteen days from the date oforder. After the publication ofestimates, the survey etc. shall be made under section 18 ofthe U. P. Act 1953. The combined reading ofsections 11, 12 and 15 would lead to a conclusion that at the time ofdeclaration ofreserved area and assigned area under Section 15, the estimate published under section 12 shall be the basis for consideration by the ,.. . Sugarcane Commissioner for the purpose of quantifying the I >requirement ofsugarcane for every factory. 21. The High Court also noted that there may be occasions when one sugar factory is not able to crush the entire sugarcane available in assigned or reserved area and at the same time another sugar factory is having the shortage ofsugarcane in its reserved area during the crushing season.

In such situations, the Sugarcane Commissioner can very well --( assign any specified area out ofthe reserved area ofthe latter factory to the former factory. The Court observed that reserved area ofa sugar factory is not ofpermanent nature and no sugar factory can claim that the area reserved for a particular year would remain with it for all the A time. The reserved area is allocated to a particular sugar factory for a 'crushing season' which can be changed or modified by the Sugarcane "'( Commissioner in the next crushing season. Ifexigencies of si~ation require, the Sugarcane Commissioner can change the area even during the same crushing season. GRANT OF LICENCE TO RESPONDENT NO 4 22. The learned counsel for the appellant contended that the action ofrespondent Nos. 1to 3 in granting licence in favour ofrespondent No. 4 was totally illegal, improper'and unreasonable. It was urged that the said action was taken only with a view to show favour to respondent No.

4 by changing the policy. The action was upheld by the High Court on the assumption that there is no shortage ofsugarcane in the State and entire sugarcane produced in the area is available to the appellant. The assumption was neither factually correct nor legally well founded. The D order passed by the High Court, therefore, deserves to be set aside. 23. The High Court, in our opinion, was right in considering the facts and circumstances in their entirety and in holding that the action of respondent Nos. 1 to 3 could not be said to be illegal or otherwise objectionable. It is, no doubt, true that earlier an application made by E respondent No. 4 came to be rejected but it was because ofthe policy then in force. Since the policy was thereafter changed, grant oflicence in favour of respondent No. 4 could not be objected by the appellant. 24. ,The High Cotirt was also right in referring to several conditions ' ..... imposed on respondent No.

4 by respondent-authorities while granting licence. Our attention has been invited by the learned counsel for the respondents to orders dated February 16, 2004 and February 17, 2004. Over and above usual conditions, certain additional conditions were also imposed. They were as under: 1. The cane price to be paid by the unit shall not be less than Minimum Statutory Price fixed by the Government oflndia. 2. The Cane purchase Tax and cane development commission on the basis ofactual cane purchased shall be payable by the . i. I MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 227 Unit y 3. The Unit shallpurchase additional balance cane other than bonded cane from the reserved areas ofSugar Mills ofthe State. There will be no permission to purchase bonded cane. 4. The crushing capacity ofthe Unit shall be limited to 1250 'fCD. 5. Prior to 2004-05 crushing season, the Unit shall take action to produce additional cane and do development as per >-· undertaking given in the application.

(emphasis supplied) 25. From the aforesaid conditions, it is abundantly clear that the authorities have protected interests ofall parties. So far as the appellant is concerned, condition No. 3 expressly states that the unit ofrespondent No. 4 shall purchase additional balance cane other than bonded cane from the reserved area ofthe sugar mills ofthe State. It further stated that ''there _,Ac_ shall be no permission to purchase bonded cane". Cane producers were also protected by imposing a condition on the respondent No. 4 that ''the cane price to be paid by the Unit shall not be less than Minimum Statutory Price fixed by the Government ofIndia''. Probably, taking into account the aforesaid situation and interest ofall concerned, the crushing capacity ofrespondent No. 4's Unit was made limited to 1250 CTI. The authorities also considered the overall industrial growth and in condition No. 5 it was stated that "prior to 2004-05 crushing season, the Unit shall take action >' )..

to produce additional cane and do development as per undertaking given in the application". 26. In our opinion, the respondents are also right in submitting that sub-section (3) of Section 4 of 1961 Act as also sub-clause (4) ofClause 3 ofthe Licensing Order, 1967 require the Licensing Authority not to reject application for grant or renewal oflicence unless the conditions laid down therein are satisfied. The respondents, therefore, rightly urged that grant of licence is 'rule' and rejection 'exception'. If keeping in view the provisions oflaw, the power has been exercised by the Licensing Authority by granting licence in favour ofrespondent No.

4, and confirmed by the State Government and the High Court did not consider the case to interfere with the exercise ofpower by Statutory Authorities, no grievance can be made by the appellant that the High Court Committed an error oflaw or ofjurisdiction which deserves interference by this Court in exercise of power under Article 136 ofthe Constitution. 27. To us, the High Court is right in holding that whether or not the sugar factory ofthe appellant has been adversely affected is essentially a question offact. Such question, therefore, in our considered opinion, can be raised by the appellant before the Authorities under the Act, and it cannot be de". ided in proceedings under Article 226 or Article 136 of C the Constitution. The appellant can also in this connection rely on additional condition No. 3 imposed on respondent No. 4 that no permission could be granted to the unit ofrespondent No. 4 to purchase 'bonded cane'. ONE MORE OPTION TO SUGARCANE GROWERS 28.

The learned counsel for the appellant also contended that the respondent authorities were wrong in observing that the farmers would have one more option ofgetting adequate price for their crop. According to the appellant, it was totally irrelevant and extraneous consideration and could not have been taken into account for granting relief in favour of respondent No. 4. The High Court, by approving the said order, has also committed similar illegality as committed by the authorities and on that ground also, the impugned order deserves to be set aside. . ... , 29. We are unable. to uphold the contention. As already indicated; the action ofthe respondent authorities was in consonance with law. Neither statutory provisions were violated nor policy guidelines were infringed.

By adhering to provisions ofsubstantive laws as also delegatedlegislation, ifthe Authorities had taken into consideration that the farmers would have one more option to get their crops sold at an appropriate price, it canndt successfully be contended that such consideration was irrelevant, extraneous or otherwise unreasonable. On the contrary, in our opinion, one ofthe considerations which must be kept in mind by the Authorities while exercising powers under various provisions oflaw would be as to whether exercise ofsuch power would also protect interest ofsugarcane y MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 229 growers. In the case on hand, that is precisely done by the respondent- 'v authorities and we see no infirmity therein. PUBLIC INTEREST 30.

The learned counsel for the appellant, however, submitted that an application for grant of licence can also be rejected if the Sugar Commissioner is ofthe opinion that it is necessary or expedient so to do in public interest with a view-(i) to regulating the manufacture ofgur or rah by units; or (ii) to avoiding uneconomic concentration ofunits in any ). -area; or (iii) to ensuring, in reserved areas, adequate supplies ofsugarcane to a factory. 31. But as observed by the High Court, by Office Order, dated November 15, 2003, the policy was changed and the State Government was empowered to relax limitation in clause (a) ofpara 1which prohibited granting oflicence to new units in the reserved area or pocket village of sugar mill.

It expressly states that "in case any Sugar Mill decides not to run in a particular year or in the estimation of Cane and Sugar _A Commissioner, the proposed Unit can be run after meeting the requirement ofSugar Mill and the Owner ofthe unit assures to pay Statutory Minimum Price notified by the Government ofIndia then on the recommendation ofCane & Sugar Commissioner, the State Government may consider E, relaxation in the aforesaid limitation. '' 32. It is not in dispute that the proposed site of the new unit of respondent No. 4 falls in the reserved area of the Sugar Mill of the >' ~ appellant. But both the Sugar Commissioner as well as the Government were satisfied that the new Unit will not affect adequate supply of sugarcane to Appellant's Sugar Mill and on such satisfaction, the power of relaxation under clause (a) was exercised. Moreover, a specific condition was imposed on the respondent No. 4 that it would not purchase bonded cane ofthe Sugar Mills ofthe State.

The High Court, taking note ofall these safeguards upheld the order ofthe authorities and we see no illegality therein. 33. It was also submitted by the learned counsel for the appellant that though the new policy empowers the Authorities to grant new licence within the radius offifteen kilometers ofexisting sugar factory in relaxation ofthe general policy, the Authority is bound to consider the provisions of ¥ Section 4of1961 Act, and particularly, Clause (i) of sub-section (3) thereof. It was strenuously contended that neither the Sugarcane Commissioner considered the factors which were required to be kept in mind nor the Government was mindful ofthose factors and on that ground also, the impugned order is liable to be quashed. It was further urged that adequacy of supply of sugarcane to the existing factory has to be considered with reference to the availability of sugarcane in the area reserved for such factory and not with reference to the availability ofthe .. _. ,.

C sugarcane in the whole State. 34. We are not impressed by the argument ofthe learned counsel. As is clear from the order passed by the Sugarcane Commissioner and by the State Government, the Unit ofrespondent No. 4 is not given any specific reserved area earmarked for any specific sugar factory and it can D purchase sugarcane from reserved/assigned area ofany sugar factory in the State. But even otherwise, we are ofthe view that in view ofadditional condition No. 3 imposed on respondent No. 4, the appellant is not J.. -. adversely affected by grant oflicence in favour ofrespondent No. 4. The said condition, as noted earlier, allows the Unit to purchase 'other than E bonded cane'. Ifit is so, no prejudice can be said to have been caused to the appellant. STATUTORY FINALITY 35.

It may also be stated that the order passed by the Sugar Commissioner is subject to appeal before the State Government and the State Government has also confirmed the said order in exercise of appellate jurisdiction on September 25, 2004. The Appellate Authority, again considered the entire controversy and held that the action taken by Sugarcane Commissioner was not illegal or improper and did not call for any interference. The Appellate Authority also did not accede to the prayer of respondent No. 4 to increase the capacity from 1250 to 1500 CIT. 36. As already adverted to earlier, the order passed by the State Government in appeal is 'final'. Thus, statutory finality is attached to the order passed by the State Government. It cannot be gainsaid that such MIS. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF 231 'statutory finality' does not oust the jurisdiction ofa High Court under y Article 226/227 ofthe Constitution nor ofthis Court under Article 32/ 136 of the Constitution.

But it is well settled that while exercising extraordinary power, a High Court or this Court will be conscious and mindful ofsuch provisions and will not substitute its decision for the decision taken by the Authority which is 'final' under the relevant law. In our opinion, the learned counsel for the respondents are right in submitting that the Origin. μ Authority as well as Appellate Authority considered the facts and circumstances and exercised the power by granting licence to respondent No. 4 and ifthe High Court did not think it proper to interfere with such order, it cannot be said that by doing so, the High Court has failed to exercise jurisdiction or exceeded its power in dismissing the petition. PROVIDING SUGARCANE ONLY TO SUGAR MILLS 37. It was then argued that the statutory scheme governing sugar and sugarcane requires preference to be given to sugar mills and their requirements have to be satisfied before sugarcane is diverted to rah/ khandsari units or power crushers.

In this connection, strong reliance was placed on a decision ofthis Court in Shri Ganesh Sugar Works v. State ofHaryana, [1987] 4 SCC 604. In that case, dealing with Haryana Khandsari Sugar Manufacturers' Licensing Order, 1972 and scarcity of production ofsugarcane, this Court held that refusal to grant or renew licences to khandsari units located within areas reserved for sugar mills .... having regard to bad seasonal conditions resulting in face ofproduction ). could not be held illegal or improper. It was in general public interest. 38. The Court also made the following observations; We may mention that while the Commissioner is now the Licensing Authority, the State Government is the appellate authority. It is a matter of common knowledge that the Sugarcane Control Q,.

Order was made in the interests ofgrowers ofsugarcane primarily -( and also in the interests of the sugar factories, that is, factories engaged in the manufacture of sugar by the vacuum pan process and in the ultimate analysis in the interests ofthe consumers by making sugarcane available for sugar production. Apart from the y fact that the sugar produced by the vacuum pan process is better "( suited for domestic consumption, it is undisputed that in the case ofvacuum pan sugar factories, the recovery ofsugar from cane ranges between 9. 5% to 11. 5% while the recovery in the case of Khandasari Units is hardly 5 to 6%. There can be no question that viewed from the viewpoint of production of sugar, it is advantageous to divert as much sugarcane as possible to sugarcane factories instead of K. handasari Units Even so K. handasari Units flourish, as is generally known because of the byproduct of '-I molasses.

As experience showed that Khandasari units are better able to tap the growers of sugarcane, it became necessary for the Government to reserve areas for sugar mills. Otherwise, sugar mills would have to remain idle for long periods unable to withstand the competition ofkhandasari units in reaching sugarcane growers. It was for that purpose, that is, with a view to prevent sugar factories from remaining idle by making available to them sufficient quantities of sugarcane that the idea of reserving areas for sugar factories was conceived. In the years when there is no dearth ofsugarcane ). ;.. _ and it is available in plenty, there is no problem and khandasari units will be free to purchase as much as sugarcane as they want in reserved areas also ifthe units are located there. But problems arise when on account ofbad seasonal conditions there is a fall in the production of sugarcane in some years.

In such years, restrictions have to be imposed on the purchase ofsugarcane by khandasari units in areas reserved for sugar factories and when the ,' -·seasonal conditions are indeed very bad, it may even become .... ( necessary for the Government to altogether ban the purchase of sugarcane by khandasari units in areas reserved for sugar factories. This may be done by the refusal to grant or renew licences to khandasari units operating in reserved areas in those years. That is precisely what has happened in the present case. It is because ofextremely bad seasonal conditions that the Cane Commissioner was forced to refuse to renew the licenses 6f the appellants on the ground of inadequate of sugarcane for sugar factories. According to the figures mentioned by Cane Commissioner, the production ofsugarcane had fallen from 52. 50 lakh tonnes in 1983- y M/S. DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF 233 84 to 46. 20 lakh tonnes in 1984-85 and 41. 38 lakh tonnes in 1985-86.

We also have it that in the previous crushing season one ofthe sugar factories, namely, the Panipat Co-operative Sugar Mills only crush 10. 80 lakh quintals ofsugarcane as against the allotted quantity of25 lakh quintals due to lack ofavailability ofsugarcane. In fact, on September 14 1984, the Government of India had . B already addressed a communication to the Secretaries to the Governments ofall sugar producing States requiring them to take certain measures to avoid diversion ofsugarcane from sugar mills. ). -· It was stated in the letter that in the year 1983-84, sugar production had declined sharply from 82. 32 lakh tonnes to 59 lakh tonnes. Among the measures suggested was "not to grant fresh licences to khandasari units in the reserved areas ofsugar factories and to the extent possible even to encourage by all possible means the existing khandasari units in the reserved areas to shift out".

We do not, therefore, have any doubt that having regard to the fall in the production ofsugarcane and the fall in the production ofsugar, the _1. banning ofsupply ofsugarcane to khandasari units by the method ofrefusing to licence khandasari units operating in reserved areas was in the public interest. 39. The High Court, in our opinion, was right in observing that Ganesh Sugar Works was decided in the light offact-situation before the Court. In our view, the learned counsel for the respondents are right in submitting that even in that case, this Court has indicated that the ,,.. . Government ought to take into consideration interest ofsugarcane growers ).. also. In the present case, the Sugarcane Commissioner has precisely performed that function when he observed that the sugarcane growers had one more option available for realizing proper return.

Apart from the fact that it cannot be said to be an irrelevant consideration, the Authorities are enjoined to keep in view this aspect as one of the considerations and we see no infirmity therein. 0 40. It is also pertinent to note that when licence was granted to respondent No. 4 by the Sugarcane Commissioner for one Power Crusher of a capacity of 1250 TCD, the appellant as also respondent No. 4 challenged that order. The grievance ofthe appellant was that no such y licence could have been granted by the Sugarcane Commissioner in favour ofrespondent No. 4. The complaint made by respondent No. 4, on the other hand, was that the Licensing Authority ought to have granted licence for 1500 TCD as applied. 41. The State Government disposed ofboth the matters by upholding the order passed by the Sugarcane Commissioner observing that the action taken by the Licensing Authority could°not be said to be illegal or improper.

It also considered the fact that farmers in the area had to face problems as Kashipur'Unit was declared as 'sick unit' and it adversely affected cane area. 42. The Appellate Authority, therefore, stated; After deeply considering of records available in the file and arguments ofAppellant and Mis DSM Sugar, I am in the opinion that the license granted to Mis IGL, Kashipur in village Sandkheda, District Udham Singh Nagar for one Power Driven Kolhu size 71x42cm, 15 Rollers hydraulic capacity 1250 TCD Open Pan Steam Boiling Systerμ for season 2003-04 under Cane Purchase Tax Act, 1961 and the Licensing Rules under the said Act by Cane and,Sugar Commissioner, Uttranchal is in accordance with the Act and Rules and there is no need to amend the order dated 17/2/ 2004 passed by the Cane and Sugar Commissioner, Uttranchal in view ofhis estimation ofcane availability. 43.

The Authority also took into consideration the interest ofthe appellant herein and protected the Factory by making the following observations; As far as, the argument ofMis DSM Sugar that the estimation ofcane availability by Cane and Sugar Commissioner, Uttranchal is wrong, it is duty of Cane and Sugar Commissioner to ensure availability ofsugarcane to Sugar Mill as from its requirement under section 15 ofUP Sugarcane (Regulation of Supply and Purchase) Act, 1953. The Cane and Sugar Commissioner, Uttranchal shall ensure that other conditions being same Mis DSM Sugar should get cane in proportion to its crushing capacity. The Cane ,,,. , M/S. DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF 235 Commissioner can reserve or divert cane from the area of one ). r Sugar Mill to other Sugar Mill on the basis ofcane availability. 44.

We are ofthe view that in the light ofthe above considerations and findings, no interference with the order was called for and the High Court was right in confirming the orders passed by the Authorities. 45. Learned counsel for the appellant urged that Clause 3 of the Gur (Regulation of Use) Order, 1968 bars use of gur for any purpose other than as specified in sub-clauses (a) to (c). It was, therefore, ~· submitted that the grant oflicence by respondent Nos. 1to 3 to respondent No. 4 for preparation ofalcoholic liquor is in violation ofthe provision of law. The learned counsel for the respondent No. 4, however, submitted that the same clause (Clause 3) confers power on the Central Government or any officer authorized by it to permit the use ofgur inter alia for the use in chemical industry or for any other industrial use. 46. The High Court considered the contention and observed that the application submitted by respondent No. 4 was limited to manufacture .. . l.

ofrah and no use was indicated at all. From the counter-affidavit filed in the High Court, no such indication was exhibited. But in any case, ifthere was violation ofprovision oflaw relating to use ofrah for a purpose other than permitted by law, the remedy was not to challenge licence but to question the use ofrah. An appropriate dire