2022 Supreme(SC) 614

SUPREME COURT OF INDIA
HEMANT GUPTA, V. RAMASUBRAMANIAN, JJ.
Swami Samarth Sugars and Agro Industries Ltd. – Appellant
Versus
Loknete Marutrao Ghule Patil Dnyaneshwar Sahakari Sakhar Karkhana Ltd. – Respondent
Civil Appeal No. 4021, 4022, 4023 of 2022, SLP (Civil) No. 12277, 12578, 12579 of 2021
Decided On : 13-07-2022

Headnote:

SUGAR CONTROL ORDER - EXTENSION OF TIME - IEM - AERIAL DISTANCE - UNFORESEEN CIRCUMSTANCES - COURT CASES - REASONABLE GROUNDS - EXTENSION OF TIME - LAPSE OF IEM - FORFEITURE OF PERFORMANCE GUARANTEE - COMPETITION - BENEFIT TO FARMERS - RECOMMENDATIONS OF DR. C. RANGARAJAN COMMITTEE - UNHEALTHY COMPETITION - INTEREST OF FARMERS.

Fact of the Case:

The appellant applied for IEM on 08.09.2010, the same was acknowledged by Government of India after Commissioner of Sugar, Maharashtra issued a certificate regarding aerial distance between the existing sugar factory and the nearby proposed sugar factory in Ramdoh (Warkhed), Tehsil-Newasa, District-Ahmednagar. It was reported that aerial distance between the sites of other sugar factories adjacent to the proposed sugar factory at Ramdoh (Warkhed), Tehsil-Newasa, District-Ahmednagar was more than 15 kms. On the basis of such certificate, IEM was acknowledged after the appellant furnished a bank guarantee of the sum of Rs. 1 crore which was to remain in force up to 04.04.2016. However, a writ petition was filed soon thereafter on 23.09.2010, challenging the IEM granted to the appellant on the ground of aerial distance of proposed sugar factory and existing sugar factory. Another writ petition was filed on 17.03.2011 challenging the IEM on the ground that the proposed sugar factory was not complying with the provisions of Environmental Protection Act, 1986. Both the writ petitions were decided on 27.01.2014 wherein the High Court passed the following order: “4. Bare perusal thereof indicates that no new sugar factory shall be set up within the radius of 15 kms of any existing sugar factory or another new sugar factory in a State or two or more States. The proviso has also been inserted in the Control Order to ensure that the restriction on setting up of two sugar factories within the radius of 15 kms is complied with. 5. The petitioners have pointed out, and in all fairness, that a certificate has been issued by the Commissioner of Sugar, Maharashtra State, Pune pointing out that the aerial distance between the sites of other sugar factories, adjacent to respondent No. 8 is more than 15 kms. 6. This certificate, dated 17.08.2010, therefore, is in compliance with the requirement in Clause 6-A reproduced above. That is the only aspect with which this Court is concerned so far as the petitioners in this petition are concerned. 7. Now, the Writ petitioners and the PIL petitioners are raising another issue, namely, the proposed sugar factory not complying with the provisions of the Environmental Protection Act, 1986 and it would indicate as to how the same falls within the radius of 500 meters from the bank of river and therefore, it is falling within no development zone and hence it cannot be set up. 8. After hearing the petitioners on this point, merely because Clause 6-A has been complied with, it does not mean that the sugar factory or the proposed sugar factory have not to comply with other laws. They are obliged to comply with the antipollution laws in the field and the laws relating to preservation of ecology and environment as well. It is only thereafter and other laws and Rules in the field being complied with that any question arises of these sugar factories becoming functional. For the present, the stand taken in the affidavit by the authorities need not be probed further. In the event, respondent No. 6 carries out construction and development, then needless to clarify that the said respondent will have to comply with all laws including the anti-pollution, environmental protection and ecology. 9. In such circumstances, the petitions need not be kept pending. They are disposed of. However, the issue of aerial distance certificate cannot be reopened at the instance of the petitioner or any other party again.”

Finding of the Court:

The High Court found that the appellant had not taken any effective steps within the period of two years from the date of acknowledgment of IEM. The appellant had neither purchased the land for four years in the name of the factory, nor placed confirmed orders for purchase of plant and machinery and even the civil work had not commenced. There were no effective steps even five years of IEM. The change of location was sought on 16.06.2014 whereas the land at the changed location was purchased on or about the year 2017. The High Court found that the amendment in the Sugar Control Order dated 24.08.2016 would not be helpful to the appellant as the IEM stood derecognized before the said amendment was carried out. The IEM stood de-recognized on 08.09.2014 as the four years for commercial production had lapsed. Thereafter, the maximum one-year extension also lapsed on 08.09.2015. Therefore, the amended provision cannot be applied to a de-recognized IEM. The High Court further found that the recommendation of the State Government was not on record for the extension of IEM. In other words, it was concluded by the High Court that the IEM stood de-recognized before the Sugar Control Order was amended on 26.08.2016. Therefore, no right accrues to the appellant. It was further held that the judgment of this Court reported as M/s Ojas Industries (P) Ltd vs. M/s Oudh Sugar Mills Ltd. AIR 2007 SC 1619 relating to retrospective effect of the amendment in the Control Order in the year 2006 would not be applicable to the present IEM which stood de-recognized prior to the said amendment.

Issues: 1. Whether in the absence of any interim order against the appellant in the first round of litigation, the period during which writ petitions were pending are liable to be excluded? Alternatively, whether the State/Central Government was justified in excluding such period while granting extension of IEM. 2. Whether the lis initiated against the appellant is a sufficient reason to exclude the period spent in such litigation and was a reasonable ground for the State/Central Government to extend IEM. 3. Whether the amended Control Order in terms of proviso to Clause 6C as amended by the State of Maharashtra on 03.12.2011 would be applicable when the High Court in the earlier writ petition has held that the issue of Aerial Distance Certificate cannot be reopened at the instance of the appellant or any other party again. Pertinently, when the order was passed by the High Court, the amended Control Order was in force. Therefore, what is the effect of the said order? 4. Whether the IEM stands lapsed on the failure on the part of entrepreneur to set up the sugar factory and start production within the time specified in Clause 6C or such lapsing would be only after an order in terms of Clause 6D of the Control Order is passed?

Ratio Decidendi: 1. The period spent in defending such writ petitions was validly taken into consideration by the State/Central Government to grant extension of time limit fixed in the Control Order. 2. The appellant was not the writ petitioner before the High Court. Rather, he was defending the permissions granted by the State and the Central Government. It was not prudent for the appellant to proceed with the heavy investment required for installation of a sugar factory and then to suffer the consequences depending on the outcome of the litigation. The appellant opted for a safer option not to erect the plant and commence production because of the pending litigation. It was a reasonable and precautionary option exercised by the appellant. The litigation initiated in public interest or by the rival sugar factory cannot be used against the appellants, more so when they have substantially failed in the first round of lis. 3. The decision of the competent authority to grant extension of time is proper exercise of the powers conferred on it and cannot be said to be illegal, irrational or suffering from procedural impropriety. 4. Though Clause 6C as applicable on 10.11.2006 as well as on 24.08.2016 and 12.08.2018 contemplates the IEM shall stand de-recognised and the performance guarantee shall be forfeited, the performance guarantee is to be forfeited in terms of Clause 6D after providing the reasonable opportunity of being heard. We find that twin conditions have to be fulfilled: (i) failure to set up plant and to commence production and then (ii) the forfeiture of the performance guarantee. Second will not arise unless the first is satisfied and the second step cannot be undertaken, without complying with an opportunity of personal hearing in terms of Clause 6D of the Control Order. Unless the performance guarantee is forfeited, there is no lapsing of IEM. Thus, unless the necessary consequences of de-recognition of IEM are undertaken, there is no automatic lapsing of IEM.

Final Decision: The appeals are allowed and the writ petitions are dismissed. The period spent in the second round of litigation shall also be excluded while determining the period during which the plant had to be set up and to commence commercial production.