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IN THE HIGH COURT OF ALLAHABAD
U. P. SINGH, S. K. PHAUJDAR
TRIVENI ENGINEERING WORKS LTD. - Appellant
Versus
UNION OF INDIA - Respondents
C. M. W. P. 41516 Of 1993
Decided On : 05/15/1996
SUGAR INDUSTRY - Grant of Letters of Intent (LOIs) to different industrial undertakings for setting up new sugar mills - Guidelines issued by the Government - Challenge to the guidelines as violative of Articles 14 and 19 of the Constitution - Validity of the guidelines - Action of the Government in not following the guidelines - Non-observance of statutory provisions of certain Acts and Rules - Locus standi of the petitioners - Legitimate expectation - Interpretation of the guidelines - Availability of sugarcane - Reserved area - Cane Commissioner's power to change the boundaries of a reserved area or even to cancel the declaration of any area as a reserved area for a factory - Appeal against the order of the Cane Commissioner - Premature writ petitions - Dismissal.
Fact of the Case:
Various writ petitions were filed challenging the grant of Letters of Intent (LOIs) to different industrial undertakings for setting up new sugar mills in the State of Uttar Pradesh. The petitioners, consisting of existing sugar mills and competitors, raised various grounds, including the validity of the guidelines issued by the Government, the action of the Government in not following the guidelines, and non-observance of statutory provisions of certain Acts and Rules.
Finding of the Court:
1. The guidelines issued by the Government were not unconstitutional and did not violate Articles 14 and 19 of the Constitution. They were merely broad guidelines to be followed in the matter of grant of license for establishment of new sugar factories and could not be read in spirit and not in letters. The distance restriction in the guidelines was only a factor for rough estimate, the real estimate was to be made not from the distance between an existing and a proposed mill, but the availability of sugarcane in the area and the potential for cane cultivation therein. 2. The action of the Government in not following the guidelines, particularly the distance restriction, was not illegal as the distance restriction was a secondary aspect, the primary one being cane availability in the area. The statistics on record indicated that cane availability was there for establishment of new sugar factories. 3. The petitioners' plea of legitimate expectation that the Government would not fail them in supply of sugarcane and any interference in this legitimate expectation would give them a right of redressal by the Court was rejected as there was no legal or vested right created in any sugar factory over the reserved area and the concept of legitimate expectation may not arise in the present case.
Issues: 1. Whether the guidelines issued by the Government for grant of LOIs to new sugar mills were unconstitutional and violative of Articles 14 and 19 of the Constitution? 2. Whether the action of the Government in not following the guidelines, particularly the distance restriction, was illegal? 3. Whether the petitioners had a legitimate expectation that the Government would not fail them in supply of sugarcane and any interference in this legitimate expectation would give them a right of redressal by the Court?
Ratio Decidendi: 1. The guidelines issued by the Government were not unconstitutional and did not violate Articles 14 and 19 of the Constitution as they were merely broad guidelines to be followed in the matter of grant of license for establishment of new sugar factories and could not be read in spirit and not in letters. The distance restriction in the guidelines was only a factor for rough estimate, the real estimate was to be made not from the distance between an existing and a proposed mill, but the availability of sugarcane in the area and the potential for cane cultivation therein. 2. The action of the Government in not following the guidelines, particularly the distance restriction, was not illegal as the distance restriction was a secondary aspect, the primary one being cane availability in the area. The statistics on record indicated that cane availability was there for establishment of new sugar factories. 3. The petitioners' plea of legitimate expectation that the Government would not fail them in supply of sugarcane and any interference in this legitimate expectation would give them a right of redressal by the Court was rejected as there was no legal or vested right created in any sugar factory over the reserved area and the concept of legitimate expectation may not arise in the present case.
Final Decision: All the writ petitions challenging the grant of LOIs to different industrial undertakings for setting up new sugar mills were dismissed.
( 1 ) ALL these writ petitions relate to grant of letters of intent (LOIs, in brief) to different industrial undertakings for setting up new sugar mills at different places in the State of Uttar Pradesh. The above petitions have been filed by existing sugar mills and by certain competitors and the LOIS have been challenged on different grounds. On the basis of the points raised, writ petitions may be categorised in 3 classes : (1) Petitions in which the guidelines of the Government have been challenged as having violated the provisions of Articles 14 and 19 of the Constitution; (2) the petitions in which the validity of the guidelines have not been seriously challenged but the action of the Government have been challenged on the ground that the guidelines have been violated; and (3) one petition in which a competitor for a location of a new sugar mill has challenged the LOI in favour of another on the ground of nonobservance of statutory provisions of certain Acts and Rules.
( 2 ) WE shall come to the details of these petitions in subsequent paragraphs.
( 3 ) THE sugar industry is a controlled industry in the sense that the Government has a control on the sugarcane production, distribution, prices, as also on the production, marketing of the finished product, sugar. By sugar, we mean the sugar produced by the process known as vacuum pan process. The sugar factories produce sugar through this process only. There are other crushers and units to produce khandsari and gur for which also legislations are there to control the production etc. , but we are concerned in these writ petitions with sugar only and not with khandsari and gur etc. except for some passing reference to the legislations controlling khandsari. Legislations for sugar and sugarcane are both Central and State ones. The first one we may refer to is Sugar Cane Act, 1934 (Central Act No. XV of 1934 ). It regulates the price of sugarcane intended for usein sugar factories. It empowers the State Government to declare any area as a controlled area, and also to fix a minimum price for purchase of sugarcane in that area. We may also refer to Sugar Cane Control Order 1966, which was made by the Central Government under its power under Section 3 of the Essential Commodities Act. This order speaks of the controlled reserved area which means any area where sugar-cane is grown and reserved for a factory under sub-clause (I ) (a) of Clause 6. Clause 6 speaks of power to regulate distribution and movement of sugarcane and the Central Government is authorised to notify any area as reserved area where sugarcane is grown for a factory having regard to the crushing capacity of the factory and availability of sugarcane in that reserved area and the need for production of sugar with a view to enabling the factory to produce the quantity of sugar cane required by it. The same clause also empowers the Central Government to determine the quantity of sugarcane a factory will require for crushing in any year. This order also empowers the Central Government to license power crushers and khandsari units and to regulate khandsari units and to regulate purchase of sugar by them. Under clause 1 of the Sugarcane Control Order the Central Government has a right to delegate the powers under clause 6 and other clauses to State Government or any officer `or any authority of a State Government.
( 4 ) WE may now come to certain orders and legislations of the State of Uttar Pradesh~ The U. P. Khandsari Sugar Manufacturers Licensing Order, 1967 indicates that the Central Government had delegated under Clause 11 of the Sugar Control Order, 1966, the powers under Clauses 6, 7, 8 and 9 of that order and this U. P. Order of 1967 was made under such delegated powers for regulating manufacture of khandasari sugar. In this Order, there is a definition of "assigned area" which means an area assigned to a factory under Section 15 of the U. P. Sugar Cane (Regulation of Supply and Purchase) Act,
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