# SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR LIMITED & ORS

- **Citation:** [2017] 2 S.C.R. 947
- **Court:** Supreme Court of India
- **Decided:** 2017
- **Case number:** Civil Appeal No. 5040 of2014
- **Bench:** A. K. Sikri, Abhay Manohar Sapre
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/shivashakti-sugars-limited-v-shree-renuka-sugar-limited-ors-31871
- **Pages:** 37

## Headnote

Sugar/Sugarcane:
Sugarcane (Control) Amendment Orde1; 1966: Cl. 6A -
Restriction on setting up of two sugar factories within the radius of
15 km - Establishment ~f sugar factory - Permission for - Sought
by the appellant - Appellant granted permission to establish sugar
factory - In the writ petitions, the High Court held that RS was an
existing factory within the meaning of Cl. 6A; that the distance
between the factory of the appellant and RS is less than 15 kms,
thus, setting up of the factory by the appellant was in vio!ation of
Cl. 6A; and that since ejfective steps were not taken, extension could
not be given - On appeal, held: On facts, since Mis. RS would not
be treated as 'existing sugar factory' within the meaning <!f Cl. 6A,
the necessity of distance requirement between Mis. RS factory and
the appellant :S factory as contained in Cl. 6A was not attracted -
Furthermore, appellant has established sugar mill and ii is
continuing to crush sugarcane since the year 2011 - Ke.eping in
mind all the given factors cumulatively, no pwpose would be sen•ed
in getting the unit of the appellant closed - Public purpose demands
that the appellant '.5 factory remain in operation and continue to
fimction - Apart from these equitable considerations on the side of
the appellant, economic factors like bank loans, employment,
generation and production at the factory serving useful public
purpose tilt the balance totally in favour of the appellant - These
cannot be overlooked, where there is hardly any statutory violation
- Directions contained in the judgment of the High Court ~et aside
- Appellant's factory to continue its operation subject to the
condition given.
Jurisprudence - Eco110111ic approach to law - Held:. Firstly,
the Court is to decide the case by applying the statutory provisions -
However, while interpreting a particular provision, economic
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impact/effect of a decision, wherever wari;anted, has to be kept in
mind - Equally, in a situation where two vi~ws are possible or there
is a discretion given to the court by law, Court needs to lean in
favour of a view which subserves the economic interest of the nation
·- Conversely, the Court to avoid that particular outcome which has
a potential to create an adverse affect on employment, growth of
infrastructure or economy or revenue of the State.
Allowing the appeals, the Court
HELD: 1.1 As regards the issue as to whether Mis. RS
would be treated as 'existing sugar factory' within the meaning
of Clause 6A of the Sugarcane Control Order, 1966 (as amended
in 2006), the submission that if a sugar factory, is not 'in operation'
on the date when a new sugar mill applies for an Industrial
Entrepreneurs Memoranda (IEM), the old sugar factory, shall
not be considered as an existing sugar mill, is accepted. [Para
27] [973-F; 974-B]
1.2 The requirement of Explanation 1 to Cl 6A is that in
order to qualify as an existing· sugar mill, it needs to crush for
five consecutive years. The High Court wrongly recorded that
the requirement is of crushing for any of the one season out of
five and this led to error on the part oflligh Court in holding that
Mis. RS was an existing sugar factory. [Para 28) [974-C]
1.3 The case of the appellant for setting up of the factory
was processed keeping in view the fact that Mis. RS was not in
operation. Further, in one case way back in the year 1995, it had
even granted 'no objection' certificate for setting up of the factory
hy the appellant. Another _significant aspect to be borne in mind
is that the State Government had passed order of liquidation of
Mis. RS in exercise of its power under Section 72 of the
Karnataka Co-operative Societies Act, 1951. Even a liquidator
was appointed to undertake the liquidation process. }'rom this
scenario, everybody would get a bonafide impression that such a
factory which is non-operational, is going to be liquidated in due
course of time. No doub

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[2017] 2 S.C.R. 947
SHIVASHAKTI SUGARS LIMITED
v.
SHREE RENUKA SUGAR LIMITED & ORS.
(Civil Appeal No. 5040 of2014)
MAY09,2017
[A. K. SIKRI AND ABHAY MANOHAR SAPRE, JJ.)
Sugar/Sugarcane:
Sugarcane (Control) Amendment Orde1; 1966: Cl. 6A -
Restriction on setting up of two sugar factories within the radius of
15 km - Establishment ~f sugar factory - Permission for - Sought
by the appellant - Appellant granted permission to establish sugar
factory - In the writ petitions, the High Court held that RS was an
existing factory within the meaning of Cl. 6A; that the distance
between the factory of the appellant and RS is less than 15 kms,
thus, setting up of the factory by the appellant was in vio!ation of
Cl. 6A; and that since ejfective steps were not taken, extension could
not be given - On appeal, held: On facts, since Mis. RS would not
be treated as 'existing sugar factory' within the meaning <!f Cl. 6A,
the necessity of distance requirement between Mis. RS factory and
the appellant :S factory as contained in Cl. 6A was not attracted -
Furthermore, appellant has established sugar mill and ii is
continuing to crush sugarcane since the year 2011 - Ke.eping in
mind all the given factors cumulatively, no pwpose would be sen•ed
in getting the unit of the appellant closed - Public purpose demands
that the appellant '.5 factory remain in operation and continue to
fimction - Apart from these equitable considerations on the side of
the appellant, economic factors like bank loans, employment,
generation and production at the factory serving useful public
purpose tilt the balance totally in favour of the appellant - These
cannot be overlooked, where there is hardly any statutory violation
- Directions contained in the judgment of the High Court ~et aside
- Appellant's factory to continue its operation subject to the
condition given.
Jurisprudence - Eco110111ic approach to law - Held:. Firstly,
the Court is to decide the case by applying the statutory provisions -
However, while interpreting a particular provision, economic
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impact/effect of a decision, wherever wari;anted, has to be kept in
mind - Equally, in a situation where two vi~ws are possible or there
is a discretion given to the court by law, Court needs to lean in
favour of a view which subserves the economic interest of the nation
·- Conversely, the Court to avoid that particular outcome which has
a potential to create an adverse affect on employment, growth of
infrastructure or economy or revenue of the State.
Allowing the appeals, the Court
HELD: 1.1 As regards the issue as to whether Mis. RS
would be treated as 'existing sugar factory' within the meaning
of Clause 6A of the Sugarcane Control Order, 1966 (as amended
in 2006), the submission that if a sugar factory, is not 'in operation'
on the date when a new sugar mill applies for an Industrial
Entrepreneurs Memoranda (IEM), the old sugar factory, shall
not be considered as an existing sugar mill, is accepted. [Para
27] [973-F; 974-B]
1.2 The requirement of Explanation 1 to Cl 6A is that in
order to qualify as an existing· sugar mill, it needs to crush for
five consecutive years. The High Court wrongly recorded that
the requirement is of crushing for any of the one season out of
five and this led to error on the part oflligh Court in holding that
Mis. RS was an existing sugar factory. [Para 28) [974-C]
1.3 The case of the appellant for setting up of the factory
was processed keeping in view the fact that Mis. RS was not in
operation. Further, in one case way back in the year 1995, it had
even granted 'no objection' certificate for setting up of the factory
hy the appellant. Another _significant aspect to be borne in mind
is that the State Government had passed order of liquidation of
Mis. RS in exercise of its power under Section 72 of the
Karnataka Co-operative Societies Act, 1951. Even a liquidator
was appointed to undertake the liquidation process. }'rom this
scenario, everybody would get a bonafide impression that such a
factory which is non-operational, is going to be liquidated in due
course of time. No doubt, subsequently the State Government
decided to revive this factory and steps in this behalf were taken
in the year 2008. However, .much before that IEM of the appellant
got acknowledged on Jone 08, 2006. As on that date, then: was
no 'existing' sugar factory within the meaning of Clause 6A of
the Sugarcane Control Order. Therefore, the requirement of
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 949
LIMITED & ORS.
distance as prescribed in Clause 6A would be inapplicable. [Para
29) [974-D-G]
. 1.4 As. regards M/s. DS factory, as per the certificate of
Survey of India given on June 05, 2006, distance between the
said factory and the then proposed factory of the appellant is
shown to be 15 km; secondly, Mis. DS had given their no objection
to the setting up of the f~citory by the appellant on .the basis of
which matter was processed further. The requirement of distance
mentioned in the Amendment Order was inserted keeping in mind
the benefit of the existing sugar factories. In a situation like this,
when such a factory itself gave 'no objection' certificate, thereby
waived the requirement, the bonafides of the appellant cannot be
doubted. The purpose of distance requirement is that lhere is
sufficient availability of sugarcane in the area so that it could easily
cater to all the sugar factories. It is not disputed that appellant's
factory has not adversely affected the utilisation of crushing
capacity of either Mis. DS factory or Mis. RS factory. It was pointed
out-by the appellant during arguments, that for last three years,
Mis. DS factory had crushed more sugarcane than their target.
Thus, in the facts of the instant case, the necessity of distance
requirement between Mis. RS factory and the appellant's factory
as contained in Clause 6A was not attracted. [Paras 30-33] [974H; 975-A-B; 976-D-F)
1.5 The High Court held that the various steps taken by
the appellant for setting up its factory, were not "effective steps"
iu terms of Sugarcane Control Amendment Order. However,
whether such steps would constitute as 'effective' ~teps as
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required by amended provisions 'contained in Clauses 6A, 6B
and 6C. of the Sugarcane Control Order or not need not even be
gone into. Important aspects which need to be highlighted are
the following:
(i) IEM of the appellant was acknowledged on June 08,
2006. It had time till June 08, 2010 to commence commercial
production as per the Sugarcane Control Order.
(ii) Extension was ap111ied first on January 27, 2010 which
was granted and thereafter second extension was granted by the
'Union oflndia till Jnne, 2011. Commercial production commenced
on May 25, 2011. These extensions were given after considering
replies of the appellant to the show cause notice that was issued.
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Even Government ofKarnataka had recommended the appellant's
case for extension. State government had also highlighteJ the
pnblic pnrpose behind this project, which was for the welfare of
the farmers as well.
(iii) The appellant took various steps for setting op of this
factory from time to time which have been taken note of above.
These include pnrcbase of land, placement of firm order for i>lant
and machinery and payment of advance in· that behalf,
commencement of civil construc!iiln, taking term loans fror.1 the
Banks etc.
(iv) These steps were taken along with due permissions
which were required under different laws, duly accorded by the
various Governmental Authorities, thus, showing its bona fides.
(v) The appellant has incurred an expenditure of Rs.2'.19.05
crores as per its audited balance sheet for 2015-2016. The
expenditure on land and building as well as machinery is Rs.142.26
crores.
(vi) The total loans for the running nnit till year 2013 were
to the tune of Rs. 237 crores.
(vii) The operational cost for mooing the factory in the year.
2012-2013 was Rs.149.29 crores.
(viii) The a1111ella11t's unit is having 377 persons as
employees on its rolls that are in regular employment. In addition,
indirect employment of approximately 7150 persons duri.ng each
crushing season is facilitated by the running of the appellant's
factory.
(ix) The appellant has also set up a co-generation plant for
prodnction of electricity which was initially 15 megawatt and, at
present, is giving sup11ly of 37 megawatt electricity.
(x) There is a11111le sugarcane supply in the State of
Karnataka and, in particular, in 'R' region and, therefore, there
is no adverse effect on the operation of any other sugar mills
including M/s. RS and Mis. DS. [Para 34] [976-G-H; 977-A-H;
978-AJ
1.6 Keeping in 111i11d all the said factors cumulatively, no
purpose is going to be served in getting the unit of the appellant
closed. On the contrary, public purpose demands that the
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 951
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appellant's factory remain in operation and continue to function.
Apart from equitable considerations on the side of the appellant,
there are certain economic factors as well which tilt the balance
totally iii favour of the appellant. These include expenditure of
approximately Rs.300 crores by the appellant in establishing the
factory (including expenditure on land and building to the tune of
Rs.142.26 crores); loans raised to the tune of Rs.237 crores;
operational cost of Rs.150 crores; generation' of employment of
377 persons 011 regular basis and indirect employment of more
than 7000 persons; and setting up of co-generation plant for
production of electricity which is giving supply of 37 mw of
electricity. These factors, particularly, bank loans, employment,
generation and production at the factory serve useful public
purpose and such economic considerations cannot be overlooked,
in the context where there is hardly any statutory violation. (Paras
35, 361 1978-B-El
1.7 Interface between law and economics is much more
relevant in today's time when the country has ushered into the
era of economic liberalisation, which is also termed as
'globalisation' of economy. India is on the road of economic growth.
It has been a developing economy and all efforts are made, at all
levels, to ensure that it becomes a fully developed economy.
Various ~easures are taken in this behalf by the policy makers.
The judicial wing, while undertaking the task of performing its
judicial function, is also required to perform its role in this
direction. It called for an economic analysis oflaw approach, most
commonly referred to as Law and Economics'. There is a growing
role of economics in contract, labour, tax, corporate and other
laws. Courts are increasingly receptive to economic arguments
while deciding these issues. In such an environment it becomes
the bounden duty of the Court to have the economic analysis and
economic impact of its decisions. It is by no means suggested
that while taking into account these considerations s1iecific
provisions of law are to be ignored. First dnty of the Court is to
decide the case by ap1Jlying the statutory provisions. However,
on the application of law and while interpreting a particular
provision, economic impact/effect of a decision, wherever
warranted, has to be kept in mind. Likewise, in a sitnation where
two views are possible or wherever there is a discretion given to
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the Court by law, the Court ueeds to lean in favour of a particular
view which subserves the economic interest of the nation.
Conversely, the Court needs to avoid that particular outcome
which. has a potential to create an adverse affect on employment,
growth of infrastructure or economy or the revenue of the State.
It is in this context that economic analysis of the impact of the
decision becomes imperative. [Para.37] [978-F-H; 979-A; 980C-F]
1.8 Eveit in those cases where economic interest competes
with the rights of other persons, need is to strike a balance between
the two competing interests and have a balanced approach. That
is the aspect which has been duly taken care of in the instant
case. Indian judiciary has resorted to economic analysis of law on
ad !toe basis. Time has come to consider the inter-discipline
between law and economics as a profound movement on
sustainable basis. These arc the additional relevant considerations
which have weighed in the mind in adopting a particular course
of action in the instant case. [Paras 38, 39] [983-B-D]
.~
1.9 The said factors demand this Court to exercise its power
· under Article 142 of the Constitution. This Court would be inclined
to do .so in the instant case keeping in view the equitable
considerations an«J .moulding the relief. [Para 40] [983-D-E)
1.10 The direc,tions contained in the judgment of the High
Court are set aside and the appellant's factory is allowed to
continue its operation subject to the condition that 14 villages
which were originally assigned to respondent No.l would be reallotted to it after taking these villages from the appellant. [Para
41] [983-F-G]
Mis. Qjas Industries Pvt. _Ltd v. Oudlt Sugar Mills Ltd.
& Ors. [2007] 4 SCR 661 : (2007) 4 SCC 723; Rajendra
Singh v. State of MP. & Ors. [1996] 4 Suppl. SCR 393
: (1996) 5 SCC 460; Raunaq Jmernational Limited v. I.
V. R. Construction Ltd. & Ors. (19981 3 Suppl. SCR
'421 : (1999) 1 sec 492 - referred to.
'Frontiers of Legal Theory' by Richard A. Posner -
referred to.
H
J2007J 4 SCR 661
Case Law Reference
referred to
Para 16
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 953
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[ 1996] 4 Suppl. SCR 393
[1998] 3 Suppl. SCR 421
referred to
referred to
Para 31
Para 37
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5040
of2014.
A
From the Judgment and Order dated 29.03.201 l of the High Court
B
ofKarnataka in Writ Petition Nos. 64254 of2010
WITH
C. A. Nos. 5041, 5042, 5043 of2014.
P. Chidambaram, Kavin Gulati, Basava Prabhu Patil, Ms. Indu
Malhotra, Sr. Advs., Ms. Ruby Singh Ahuja, Vishal Gehran~, Nakul
Gandhi, Ms. Manik Karanjawala (for M/s. Karanjawala & Co.), Gopal
Sankarnarayan, Ms. Ranjeeta Rohtagi, Ms. Kaveeta Wadia, Shashank
Tripathi, Ms. Liz Mathew, Dipak Kumar Jena, Rupesh Kumar, Anish
Kr. Gupta, Vikas Bansal, D. S. Mahra, Ms. Vimla Sinha, T. C. Sharma,
Karan Seth, Shashank Dewan, Shubhranshu Padhi, Kush Chaturvedi,
Amjid Maqbool, Rameshwar Prasad Goyal, Ms. Anitha Shenoy, Tara
Chandra Sharma, Vimal Sinha, G. S. Makker, Ms. Sushma Suri, Aman
Varma, Ms. Anshula Grover, Naresh Kumar, Venkita Subramoniam T.
R., Raghavendra S. Srivatsa, Ashok Kumar Sharma, Joseph Aristotle
S., Ms. PriyaAristotle, K. Priyadarshini, Advs. forthe appearing parties.
The Judgment of the Court was delivered by
A. K SIKRI, J. l. The Industries (Development and Regulation)
Act, 1951 (for short, the' Act') contains the provisions whereby certain
industries mentioned in the First Sshedule to the said Act are brought
under the control of the Union Government. It mentions, vide Entry 25
oftl1e First Schedule, "sugar industry" as well, to be 'scheduled industry'.
The effect thereof is that by virtue of Sections 11 and 12 of the Act,
· compulsory licensing is required in respect of sugar industry. Sugar is
also one of the essential commodities covered by Essential Commodities
Act, 1955. In respect of such essential commodities, Union Government
is empowered to fix the prices of the product and also to regulate the
distribution and supply of such products. In exercise of the powers
conferred by Section 3 of the Essential Commodities Act, 1955, the Union ·
Government promulgated the Sugarcane Control Order, 1966 which, inter
alia, provided for the minimum price of sugarcane to be fixed, power to
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regulate the distribution and movement of sugarcane and power to issue
licenses to cane crushers etc. Clause 11 provides that the Central
Government may delegate to the State Government or any Officer of
the State to perform any of the functions of the Central Government.
2. The Government oflndia, periodically issued guidelines, •mder
the Act, in respect of the sugar industry through 'press notes'. These
press notes, inter alia, provided that !incenses for new sugar factories
would be granted subject to a minimum distance requirement (which
was varied from time to time). A Press Note no. 16 dated November 08,
1991 provided for a 25 km distance which could however be relaxed to
15 km in deserving cases where cane availability so justified. Clauses 2
and 3 are important as they provided that the basic criteria would be the
availability of the cane and the potential for development of sugarcane.
These clauses read as follows :
"Industrial Policy Highlights
EXHIBIT NO. 12
PRESS NOTE NO. 16[1991 SERIES]
GUIDELINES FOR LICENSING OF SUGAR FACTORIES
A. A Government oflndia have reviewed the guidelines for licensing of
E .. new and expansion of existing sugar factories issued vi de this Ministry's
Press Note No. 4[1990 Series] dated 23.7.1990. In sup-Oersession of
the aforesaid Press Note, Government have formulated the following
revised guide I ines:
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"l. New sugar factories will continue to be licensed for a min;mum
economic capacity of2500 tones cane crush per day [TCD]. There will
not be any maximtlm limit on such capacity. However, in area specified
as industrially backward areas by the Government oflndia and certified
by the Indian Council of Agricultural Research to be agro-climatically
suited for development of sugarcane, licensing of new sugar factories in
the co-operative and public sectors would be allowed foran initial capacity
of 1750 TCD subject to the condition that the units would expand their
capacity to 2500 TCD within a period of5 years of going into production.
2. Licenses for new sugar factories will be issued subject to the condition
that the distance between the proposed new sugar factory and an existing/
already licensed sugar factory should be 25 kms. This distance criterion
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 955
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of 25 kms could, however be relaxed to 15 kms in special cases, where
A
can availability so justifies.
3. The basic criterion for grant oflicenses fornew sugar units would be
their viability, mainly from the point of view of cane availability and
potential for development of sugarcane.
4.All new licenses wil be issued with the stipulation that cane price will
be payable on the basis of sucrose content of sugarcane.
B
5. Other things being equal, preference in licensing will be given to
proposals from the co-operative sector and the public sector, in that
order, as compared to the private sector. In case more than on application c
is received.from any zone of operation, priority will be given to the
application received earlier.
6. Priority will continue to be given to sugar factories with cap&city less
than 2500 TCD to expand to the aforesaid minimum economic capacity.
7. While granting licenses for new units and expansion projects, the
additional capacity to be created up to the end of the English Plan, i.e.,
1996-97, will be kept in view.
8. While granting licenses for new sugar factories, industrial licenses in
D
respect of down-stream units for the use of molasses, i.e., ·industrial
E
alcohol, etc. will be given readily.
B. Applications for licenses will be initially screened by the Screening
Committee of the Ministry ofFood. While considering such applications,
the comments of the State Government/Union Territory Administration
concerned would also be obtained. The State Government/Union lerritory
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Administration concerned would also be obtained. The State Government/
Union Territory Administration would be required to furnish their
comments within 3 months of the receipt of communication from the
Ministry of Food.
C. Applications for grant of industrial licenses for the establishment of
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new sugar factories as well as expansion of existing units should be
submitted directly to the Secretariat for Industrial Approvals in the
Department of Industrial Development in Form IL along with the
prescribed fee of Rs. 2500/-. A copy of the application may also be sent
to the Ministry of Food.
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A
D. The procedure and guidelines, as given above, are brought to be
notice of the entrepreneurs for their information and guidance.
No, I Of74lf91-LP New Delhi, the 8'" November, 1991
B
Forwarded.to Press Information Bureau for wide publicity to the contents
of the above Press Note.
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SD/-
[S.BHAVANI]
DEPUTY SECRETARY TO THE GOVERNMENT OF INDIA
PRINCIPAL INFORMATION OFFICER, PRESS INFORMATION
BUREAU, SHASTRI BHAWAN, NEW DELHl-110 001."
This Press Note was amended from time to time by Press Notes
dated January I 0, 1996, June 15, 1998 and August 31, 1998.
3. Press Note-12 dated August 31, 1998 is of some relevance in
the present case. This was the result ofliberalization policy of the Central
Government. After embarking on liberalization and globalization, in order
to ease the doing of business, the Government decided to relax the control
over various types of industries. By the aforesaid Notification dated
August 31, 1998, the Government exempted persons from taking licenses
to set up a sugar factory. This was done in exercise of power contained
under Section 29(b) of the Act subject to the condjti-On that a minimum
distance of 15 km would continue to be observed between an ex;sting
sugar mill and a new mill. Pertinently, insofar as Sugarcane Control
Order, 1966 is concerned, there was no provision of minimum distance
between the two sugar mills. For this reason, the aforesaid Press Notes
were held to be administrative guidelines, not having statutory character
by Allahabad High Court.
4. The appellant herein had made an application for permission to
establish a new sugar factory. One, Mis. Raibagh Sahakari, which was
in the same vicinity where the appellant was seeking to establish its
factory, gave a 'no objection' certificate to the appellant for establishing
a sugar factory in the year 1995. The application of the appellant was
processed and the Government of India issued a Letter of Intent (LOI)
to the appellant on July 03, 1996 permitting it to establish a sugar factory
at Village Saundatti, Tehsil Raibagh, District Belgaum. This was done
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 957
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before the new policy was announced vide Press Note-I 2 dated August
31, I 998, i.e., during the Licence Raj . After the aforesaid Press Note,
there was paradigm shift in the approach as no licence was now required
and instead requirement was to file an Industrial Entrepreneurs
Memoranda (JEM) only. Accordingly, only condition which was to be
fulfilled by the appellant was that there was no sugar factory existing
within the radius of 15 km from the appellant's proposed site w~ich was
so stipulated in Press Note dated August 31 1988, i.e., by administrative
decision. On June 05, 2{)06, the Commissioner of Cane Development/
Director of Sugar issued a certificate to this effect certifying that there
was no such sugar factory within the radius of 15 km from the appellant's
site. After the issuance of this certificate, the appellant filed its IEM
which was duly acknowledged by the Ministry of Commerce and
Industries.
5. We may point out, at this stage, that the present dispute is about
the existence of Raibagh Sahakari Factory, i.e., whether it is within the
radius of 15 km from the appellant's factory or not? Pertinently, on
January 24, 2004, the Government of Karnataka had passed an order of
liquidation ofRaibagh Sahakari in exercise of its power under Section·
72 of the Karnataka Co-operative Societies Act, 1951. Certain
developments took place qua Raibagh Sahakari thereafter. We would
like to state those events and developments subsequently, though these
events were taking place simultaneously with the process of setting up
of the factory by the appellant. It would be apposite to first take note of
the manner in which the appellant has set up its factory at the proposed
site.
6. As pointed out above, the appellant filed its JEM on August 08,
2006, supported by the certificate issued by the Cane Development
Commissioner that there was no existing sugar factory within the radius
of 15 km. Thereafter, on October 20, 2006, the Government of Karnataka
granted permission to the appellant for purchase of agricultural lands for
industrial purposes in Raibagh Taluk in village Yadrav. Similar permission
was granted under Section 109( 1) of the Karnataka Land Reforms Act,
1961. Similar permission under Section 109(1) on November 20, 2006
for land admeasuring a total of 38 acres and 11 guntas for setting up a
sugar factory in village Yadrav and Saundutti was also granted by the
Deputy Commissioner, Belgaum.
7. The Karnataka Uayog Mitra set up under the Karnataka
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Industrial Facilitation Act, 2002 forwarded a proposal to the Commissioner
for Cane Development, for setting up a sugar factory by the appellant.
It was placed before the State High Level Clearance Committee, inviting
comments from Commissioner.
8. On November 03, 2006, the Karnataka Udyog Mitra, act:ng as
a single window for clearance of projects in the State invited comments
from the Deputy Cane Commissioner with regard to specific survey
numbers in villages Saundutti and Yadrav, describing the type of land
which was required to be sued. While this process was on, another
significant development took place with which this case is directly
concerned.
9. While the !EM of the appellant was being processed, a signiiicant
step was taken by the Government of India, which has turned out to be
very crucial for the appellant's factory. The Sugarcane (Control)
Amendment Order, 2006 was brought into force on November I 0, 2006.
Clauses 6A to 6E were inserted. Now by Clause 6A, a minimum distance
requirement of 15 kms was brought into force. This requirement, which
was hitherto administrative in nature, has, become a statutory
requirement. However, only Clauses 6B(l) to 6D were made appli~able
by virtue of Clause 6E to industries whqse IEM stood acknowledged till
this date. Thereafter, following steps were undertaken for establishment
of the factory by the appellant:
(a) The Karnataka Pollution Control Board inspected the site at
village Yadrav and Saundutti and gave its opinion on December 15, 2006
with regard to the viability of the project to the Karnataka Udyog Mitra.
(b) Another factory, known as Doodhganga Sugar Factory also
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issued its No Objection Certificate for establishment of the sugar factory
at village Saundutti.
(c) The Director oflndustries informed the appellant on May 03,
2007 that its project of establishing a 3000 TCD plant, 12 M\V Cogeneration Plant and 30 KLPD Molasses to Ethanol Plant with an
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investment of Rs. 106.840 Crores in Saundutti and Yadrav villag's had
been cleared by the High Level Committee of the State.
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(d) The Canara Bank granted a perforinance guarantee for Rs. I
Crores as per the requirement of Clause 6A Explanation 2 r/w clause
6E(2) of the Order, 2006.
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 959
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(e) The Survey oflndia on an application by the appellant issued
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a Distance Certificate certifying that the distance between the arpellant's
factory and that of Mis. Raibagh and Shree Doodhganga was not less
than 15 Kms.
(t) The Cane Commissioner, issued a Certificate stating that the
crushing operations of Mis. Raibagh had stopped from 2001-2002.
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(g) The Government ofKarnataka allotted 14 villages of Raibagh
and six of Doodhganga to the appellant.
(h) The Commissioner, Cane Development/ Director of Sugar
certified that the distance of the two factories in question from the
appellant's unit was more than 15 kms vide its letter dated August 17,
2007.
(i) Appellant was granted permission under the Knrnataka
Industries (Facilitation) Act, 2002 on November 07, 2007.
0) After obtaining all requisite permissions, various steps were
taken by the appellant such as, purchasing land, placing an order for
machinery, placing an order for setting up civil works and applications
and approvals for financial assistance.
(k) The Government oflndia accepted the performance guarantee
submitted by the appellant on April 15, 2008 and directed it to file the
progress report of the project.
(I) The Gram Panchayat Diggiwadi granted and NOC for
establishment for factory at village Yadrav.
(m) The Gram Panchayat Diggiwadi granted an NOC for
establishment of factory at Village Saundutti.
(n) The appellant submitted progress reports to the ChiefDirecto;·,
Sugar for the month of September, 2008. Further, progress repcrts dated
October 31, 2008, July 30, 2009, January 27, 2010 were also submitted.
(o) NOC was issued by the Pollution Control Board for setting up
the appellant unit. As the Raibagh factory stood closed, the Government
took steps to restart the factory and after a tender process Shree Renuka
Sugar was allowed to restart the factory, for which a lease C:eed Wl's
executed.
Even the grant of this lease was challenged in a bunch of writ
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petitions bearing no. 31661 of2008 and connected matters. These writ
petitions were dismissed by an order dated February I 0, 20 I 0 wherein,
in para 4 of that order, it was noticed that the sugar factory had stopped
crushing since 2001-2002.
(p) The appellant filed an application dated January 27, 20 I 0 before
the State Government with the request to make a recommendation for
permission to extend time for implementing the project.
(q) In view of the progress reports submitted by the appellant on
March 09, 20 I 0, the Government of Karnataka referred the appellant's
case for extension of time for taking effective steps and commencement
of production. The appellant also requested for extension of time.
(r) First show cause notice dated April 29, 20 I 0 was issued by the
Government oflndia requiring the appellant to state why its performance
guarantee not be.forfeited for not taking effective steps.
(s) A detailed reply dated May 06, 2010 was submitted by the
appellant, detailing the effective steps taken.
(t) The appellant wrote letter dated June 21, 2010 to the Chief
Director, Sugar, detailing the steps taken and requesting for extension of
time. It was followed by another letter dated July 22, 20 I 0 to the Chief
Director, Sugar, detailing the steps taken and requesting for extension of
time bringing to its notice that 7. I 7 acres of!and had been purchased
and loan had been sanctioned. It was pointed out that the Director had
been shot at and was in hospital for a year leading to delay.
(u) Considering the reply filed by the appellant, the Government
oflndia dropped the show cause notice and granted an extension to the
appellant to commence production by December 07, 20 I 0.
(v) The Labour Commissioner granted registration to the appellant.
(w) Government of Karnataka, on Noven_iber I 6, 20 I 0, requested
GOJ for a further extension. The Government of India granted the
second extension of time to the appellant till June 07, 201 I. It is an
admitted case that factory was duly set up and production started before
June 07, 201 I. The appellant has also been given the environmental
clearance. Government of India even granted licence dated March 24,
2011 for crushing for the season 20 I 0-20 I I.
I 0. After recapitulating the aforesaid background leading to the
SHJVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 961
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establishment of factory and start of production in the said factory by
the appellant herein, we now advert to the contentious issue cf setting
up of this factory within 15 km from the sugar factory, Raibagh Sahakari.
As pointed out above, on November 06, 1995, Mis. Raibagh Sahakari
had issued 'no objection' certificate to the appellant. In any case, on
January 24, 1995, order of liquidation in respect of Raibagh Sahakari
was passed by the Government ofKarnataka. On September 14, 2006,
the Cane Commissioner had written to the Secretary, Government of
Karnataka bringing to its notice the fact that in Raibagh Taluk, the total
production of sugarcane was 23.32 lakh tonnes as on that date Raibagh
Sahakari factory_was lying closed. According to the appellant, because
of this reason there was excess cane available which was being taken
to Maharashtra from Karnataka, thus, causing the loss to the exchequer.
Jn this backdrop, another factory Doodhganga Krishna Sahakari which
was in the same vicinity (though more than 15 kms away) had given 'no
objection' dated August 12, 2006 for allocating six villages to the
appellant's proposed factory.
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i I. Insofar Raibagh Sahakari Factory is concerned, a liquidator
had been appoi~ied by the State Government. The State Government,
however, made endeavour thereafter to revive this sugar mill. For this
purpose on July 19, 2007 the Government notified tenders for giving this
factory by way oflease. This Notification inviting tender was challenged
by certain persons in the form of writ petition filed in the High Court.
The High Court dismissed the writ petition, thereby upholding the action
of the Government to invite tenders. In this order dated January 10,
2008 passed by the High Court, it was categorically noted as a fact that
this Raibagh factory was lying closed from the year 2001-2002. Be as
it may, the tender process went on and ultimately tender of Respondent
No. I herein, i.e., Shree Renuka Sugar Limited was accepted and lease
deed dated October 16, 2008 was executed in favour of Respondent- 1
thereby allowing it to restart the said factory. Even this grant of lease
was challenged in a bunch of writ petitions which were dismissed by the
High Court on February I 0, 2010. In this order as well, the High Court
again noticed that since the factory had been lying closed since 2001.-
2002, it needed a restart which was in public interest. In this manner, it
is Respondent no. I which is now running Raibagh Sahakari factory and
has now taken a position that since Raibagh Sahakari is with in the radius
of 15 kms from the place where appellant had set up its factory, as per
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the provisions of clause 6A ofS~garcane (Control) Amendment Order,
2006, no permission could have been given to the appellant to start its
factory.
12. It may be noted here that between June, 20 I 0 and November,
20 I 0, four writ petitions, in quick succession, came to be filed against
the appellant for stalling its project, at the stages when substantial work
had been accomplished by the appellant for setting up of the factory.
The details of these writ petitions are as under:-
1. On June 17, 2010: W.P. No. 64254of2010 filed by Renukaat
Dharwad for declaring the !EM dated June 08, 2006 tc have
lapsed. No interim Order passed in this case.
2.
On September 14, 2010: W.P. Nos. 66903-907/2010, W.P.
Nos. 66926-35/20 I 0, purportedly filed through some members
of Mis. Raibagh Sahakari. No interim order passed in this
case also.
3.
On October 18, 20 I 0: W.P. No. 66920/20 I 0 and W.P. No.
66972-990/20 I 0 filed by ce11ain members of Doodhganga
Krishna Sahakari of Nandi. In this case, an interim order
was passed to the effect that all steps taken by the appellant
would abide by the result of the writ petitions.
4. On November 26, 2010: W.P. No. 37143 of2010 filed as PIL.
13". These writ petitions were finally heard together and have been
decided by the High Court vide impugned judgment dated March 29,
2011. The High Court has held that the distance between the factory of
the appellant and Raibagh Sahakari is less than 15 kms and, therefore,
the setting up of the factory is in violation of clause 6A of the Sugarcane
(Control) Amendment Order, 2006. As a consequence, the IEM of the
appellant is held to be derecognized. The High Court has also held that
extensions dated August 18, 20 I 0 and December 0 I, 20 I 0 were without
jurisdiction as "effective steps" in terms of Sugarcane Control
Amendment Order were not taken and, therefore, no extension could be
given.
14. It has already been pointed out that the Survey of India had
issued the certificate dated July 16, 2007 certifying that distance between
the appellant's proposed factory and Raibagh Sahakari factory as well
as Doodhganga was more than 15 kms. Before the High Court, Survey
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 963
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oflndia had filed an affidavit stating that such certificate was issued as
per the prevailing procedure which was prevalenttill December 31, 2007.
It was further pointed out that the Survey of India had notified new rules
for measuring distance on September 02, 2007. The measurement of
distance, as per new Rules, showed that distance between the two
factories was less than 15 kms. Such a clarification was given by the
Survey of India in the High Court in the aforesaid writ rctitions.
Significantly, the Survey oflndia had not recalled its certificate dated
July 16, 2007 on the basis of which the case of the appellant for setting
up the factory was processed and all due permissions accorded to it.
I 5. The appellant filed Special Leave Petition against the impugned
judgment in which notice was issued on May 13, 2011 and operation of
the factory was stayed till further orders. Thereafter, leave was granted
and this stay has contfnued. As a result, the factory of the appellant is
still operational. Certain further events which have taken place after
filing of the said Special Leave Petition, in which leave was granted
thereby co·nverting it into civil appeal, may also be noted at this stage:
(i) The Government grants Factories Act approval.
(ii) RTI information from Raibagh stating that there was no
crushing from 2002-03.
(iii) Statement issued by Joint Collector, Agriculture showing the
total availability of sugarcane for the Belgaun District. As
per this, a sufficient quantity of sugarcane is available to take
care of the needs of all the factories in that area.
(iv) The Pollution Control Board indicates that M/s. Raibagh did
not have air and water pollution clearances between 200208.
(v) The Government informs tlwt 1herc was no license! obtained
by Raibagh Sahakari for the years 2003-2008 for crushing.
(vi) Cane Commissioner under RTI infom1s that there is no
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application by Raibag Sahkari for crushing from 2001-208.
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(vii) Najilingappa Sugar Institute issues a rep01t giving rletails of
sugarcane available, crushed and uncrushed till 2011.
(viii) While the present appeals were pending, this Court directed
the Survey oflndia to undertake fresh measurements as per
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the policy of measurements now formulated from January
01,2008.
16. A perusal of the order of the High Court would reveal that all
the official respondents, viz., the Union of India, the Commissioner for
Cane Development and Director for Sugar (Government of Karnataka),
the Government of Karnataka as well as the Survey of India had
supported the appellant herein, by filing their detailed responses-cumstatement of objections in the writ petitions filed in the High Court. The
Union of India had, imer a/ia, pointed out that the minimum distance
criteria of 15 km as mentioned in Press Note dated August 31, 1998 was
directive in nature and not mandatory and in this behalf reference was
made to the judgment of Allahabad High Court. At the same time, Delhi
High Court had decided otherwise.