IMPORTANT POINT
The Sugarcane (Control) (Amendment) Order, 2006 imposes a bar on the subsequent IEM Holders in the matter of setting up of new sugar mills (factories) during the stipulated period given to the Earlier IEM Holders to take effective steps enumerated in Explanation 4 to Clause 6A of the Sugarcane (Control) (Amendment) Order, 2006 dated 10-11-2006.

Headnote:Industries (Development and Regulation) Act, 1951—Section 29B read with Press Note No. 12 dated 31-8-98 —Sugarcane (Control) Order, 1966—Clauses 6A to 6E—Sugarcane (Control) (Amendment) Order, 2006—De-licensing of Sugar Industry—Bar of ‘Distance’ for setting up new sugar mill—Requirement to file an Industrial Entrepreneur Memorandum (EMI) by the entrepreneur who desires to avail of the de-licensing of sugar industry—Press Note No. 12, GOI clarified that in order to avoid unhealthy competition among sugar factories to procure sugarcane, a minimum distance of 15 Kms has to be observed between an existing sugar mill and a new mill—On 13-5-04, ‘Ojas’ filed its IEM for setting up a sugar mill—After four days, on 17-5-04, ‘oudh’ filed its IEM for setting up a sugar mill within 72 7.2 kms from proposed sugar mill of ‘Ojas’—‘Ojas’ filed writ petition for setting aside IEM filed by ‘Oudh’—High Court held that Notification dated 11-9-98 read with Press Note No. 12 dated 31-8-1998 prescribing 15 kms distance between existing sugar mill and a new sugar mill did not operate to the prejudice of Qudh—It was held that the said Press Note applied only to case where a new mill is proposed to be set up within 15 kms of an existing sugar mill—Union of India issued Sugarcane (Control) (Amendment) Order, 2006 laying down effective steps which the applicant is required to take—Whether Sugarcane (Control) (Amendment) Order, 2006 operatis retrospectively—(Yes)—It will not apply to mills which are already functioning—This 2006 Order will apply only to cases where IEMs are pending in disputes in various courts.
       Held : Before the High Court one of the submissions made on behalf of the Oudh was that the Notification dated 11.9.98 under Section 29B(1) of the 1951 Act read with Press Note No.12 dated 31.8.98, did not provide for a bar for the Subsequent IEM Holder in the face of the First IEM Holder taking effective steps within the specified time-limit. In the impugned judgment (vide para ‘65’) the High Court has stated, while accepting the contention of Oudh, that the Central Government was free to amend Press Note No.12 and provide for a bar for Subsequent IEM Holders from setting up a sugar mill within 15 KMs of the place where the proposed sugar mill under the Earlier IEM is proposed to be set up. When High Court decided the matter there was no such express bar. However, by way of Sugarcane (Control) (Amendment) Order, 2006 dated 10.11.06 a bar is introduced vide Clause 6A to 6E for setting up a new sugar factory (mill) by a person taking effective steps after filing IEM. In other words, if the First IEM Holder or the Earlier IEM Holder takes effective steps to implement its IEM then the Subsequent IEM Holder cannot proceed with his IEM. If the First or Earlier IEM Holder completes its Projects successfully then the Remaining IEMs for that area shall become non est. They shall, however, remain in suspense during stipulated period when the Earlier IEM Holder takes effective steps for implementing its IEM. Therefore, the very basis of the impugned judgment is now eliminated. Hence, we are not required to examine once again the validity of the said judgment. (Para 14)
       Sugarcane (Control) (Amendment) Order, 2006 inserts Clauses 6A to 6E in Clause 6 of the Sugarcane (Control) Order, 1966. It retains the concept of “Distance”. This concept of “Distance” has got to be retained for economic reasons. This concept is based on demand and supply. This concept has to be retained because the resource, namely, sugarcane, is limited. Sugarcane is not an unlimited resource. “Distance” stands for available quantity of sugarcane to be supplied by the farmer to the sugar mill. On the other hand, filing of bank guarantee for Rs.1 crore is only as a matter of proof of bona fides. An entrepreneur who has genuinely interested in setting up a sugar mill has to prove his bona fides by giving bank guarantee of Rs.1 crore. Further, giving of bank guarantee is also a proof that the businessman has the financial ability to set up a sugar mill (factory). Therefore, giving of bank guarantee has nothing to do with the Distance Certificate. As far as effective steps are concerned we may point out that apart from the steps enlisted in the earlier Notification dated 11.9.98 read with Press Note No.12 dated 31.8.98, the Sugarcane (Control) (Amendment) Order, 2006 has laid down such steps like purchase of required land in the name of the factory (mill), placement of a firm order for purchase of plant and machinery for the factory, payment of advance or opening of letter of credit with suppliers, commencement certificate of civil work and construction of building, sanction of requisite term loans from the banks or financial institutions and any other step prescribed by the Central Government in this regard. In our view Clauses 6A to 6E have been introduced in Clause 6 of Sugarcane (Control) Order, 1966. In our view Clauses 6A to 6E are clarificatory in nature.(Para 15)
       It is to plug the loophole that the said Order has been issued on 10.11.06. In our view, therefore, the Sugarcane (Control) (Amendment) Order, 2006 is retrospective. In all pending cases the Central Government now seeks to put a bar for setting up new sugar factory (mill) for a limited period during which the Former or Earlier IEM Holder is required to take effective steps. The said Order of 2006 is not putting a ban on setting up of new units. It is only giving a priority in the matter of setting up of new units. Therefore, the said 2006 Order operates retrospectively. It will not apply to mills which are already functioning. The said 2006 Order will apply only to cases where IEMs are pending in disputes in various courts. The said 2006 Order will also apply after our judgment to those cases which are under dispute and where milling has not commenced or permitted to commence.(Para 15)
       The concept of “Distance” is different from the concept of “setting up of unit” in the sense that setting up of a unit is the main concern of the businessman whereas a concept of “Distance” is an economic concept which has to be taken into account by the Government because it is the Government which has to frame economic policies and which has to take into account factors such as demand and supply.(Para 15)
       We hold that the Sugarcane (Control) (Amendment) Order, 2006 imposes a bar on the Subsequent IEM Holders in the matter of setting up of new sugar mills (factories) during the stipulated period given to the Earlier IEM Holders to take effective steps enumerated in Explanation 4 to Clause 6A of the Sugarcane (Control) (Amendment) Order, 2006 dated 10.11.2006. We further hold that the said 2006 Order operates retrospectively. We have cleared the Kumbhi Project. All other Projects falling in various writ petitions in the Allahabad High Court (Lucknow Bench) will be decided by the High Court in accordance with the principles laid down in this judgment.(Para 19)

JUDGMENT

Kapadia, J.—Leave granted in petitions for special leave.

2. In this batch of matters we are required to interpret Press Note No.12 dated 31.8.1998 issued by Government of India, Ministry of Industry, concerning de-licensing of Sugar Industry.

3. For the sake of convenience we state the facts occurring in Civil Appeal No. of 2007 arising out of S.L.P. (C) No.7690 of 2006 – M/s. Ojas Industries (P) Ltd. Versus M/s. Oudh Sugar Mills Ltd. & Others.

Proliferation of Industrial Entrepreneur Memorandums to block competition is the cause of dispute.

On 31.8.98 Government of India (for short, ‘GOI’) decided to delete sugar industry from compulsory licensing under the Industries (Development and Regulation) Act, 1951 (For short, ‘1951 Act’). In that Press Note No.12, GOI clarified that in order to avoid unhealthy competition among sugar factories to procure sugarcane, a minimum distance of 15 KMs has to be observed between an existing sugar mill and a new mill (factory). Further, the entrepreneur who desires to avail of the de-licensing of sugar industry was required to file an Industrial Entrepreneur Memorandum (for short, ‘IEM’) with the Ministry of Industry. In the said Press Note it was further clarified that those entrepreneurs who have been issued Letter of Intent (for short, ‘LOI’) for manufacture of sugar need not file an initial IEM and in such cases, the LOI Holders shall file Part ‘B’ only of the IEM at the time of commencement of commercial production.

4. The Notification dated 11.9.98 was issued under Section 29B(1) of the said 1951 Act. It had to be read with Press Note No.12 dated 31.8.98. It was issued to usher in the policy of de-licensing.

4. After de-licensing 2232 IEMs were filed till July 2005 out of which 600 IEMs were filed in U.P.

5. On 13.5.04 M/s. Ojas Industries (P) Ltd. (for short, ‘Ojas’) filed its IEM for setting up a sugar mill at village Baisagapur, Distt. Lakhimpur Kheri, U.P. It was acknowledged by GOI. Ojas claims to have obtained permission for purchase of lands under U.P. Zamidari Abolition & Land Regulation Act. It claims to have placed orders for entire plant and machinery from M/s. S.S. Engineers, Pune in February 2005. It claims to have placed an order of the value of Rs.8.65 crores for construction of the factory building. It also claims to have made financial tie-ups with banks and other financial institutions for meeting expenses of more than Rs.20 crores. It claims to have approached U.P. Pollution Control Board for grant of NOC dated 28.4.05. It claims to have obtained such NOC. Ojas claims to have spent Rs.20 crores under various Other Heads. After four days on 17.5.04, M/s. Oudh Sugar Mills Ltd. (for short, ‘Oudh’) filed its IEM for setting up a sugar mill (factory) at village Saidpur, Khurd, Distt. Lakhimpur Kheri, U.P. within 7.2 Kms from the proposed sugar mill of Ojas in Basaigapur. This has led to the dispute between the two companies.

6. On 23.4.05 Ojas filed its Writ Petition No.7123/05 before the Delhi High Court for setting aside the IEM filed by Oudh. On 28.5.05 Oudh filed a writ petition in Delhi High Court bearing No.9892/05 to set aside the IEM filed by M/s. Bajaj Hindustan Ltd. for setting up the sugar mill in Titarpur.

7. On 30.6.2005, pursuant to the Orders of the Delhi High Court, the matter was heard by Chief Director, Sugar, (GOI) who approved the IEM filed by Ojas. The IEM filed by Oudh was disapproved. Aggrieved by the decisions of the Chief Director, Sugar, (GOI), Oudh filed Writ Petition No.11748/05. On 26.7.05 Oudh filed another Writ Petition No.12078/05 challenging the IEM of M/s. Bajaj Hindustan Ltd. for setting up its sugar mill at village Khambarkhera.

8. Be that as it may, by the impugned judgment dated 22.12.05 the Division Bench of the Delhi High Court held that the Notification dated 11.9.98 read with the Press Note No.12 dated 31.8.98 prescribing 15 KMs distance between existing sugar mill and a new sugar mill did not operate to the prejud

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