Summary
A new sugar factory's IEM, acknowledged in 2010, was at once challenged by the existing factory over aerial distance; the petitions failed in 2014 and the distance certificate was declared unchallengeable. Denied an environmental clearance, the entrepreneur obtained extensions and a change of site from the Central Government. The Bombay High Court cancelled the IEM as de-recognised under Clause 6C of the Sugarcane (Control) Order, 1966 and applied the later 25 km norm. The Supreme Court allowed the appeals. Time spent under the cloud of rival litigation, even without a stay, could be excluded; the extensions were valid decisions under the amended Control Order, which applies retrospectively; the distance norm on the date of the IEM governs; and an IEM does not lapse automatically unless the performance guarantee is forfeited after a hearing under Clause 6D.
Issues
- Whether the period spent in litigation initiated by rivals against an IEM, without any stay, may be excluded in computing the time for taking effective steps and commencing production under Clause 6C of the Sugarcane (Control) Order, 1966.
- Whether the State's enhanced 25 km minimum distance norm of 2011 applied to an IEM acknowledged in 2010, after the High Court had held the aerial distance certificate could not be reopened.
- Whether an IEM lapses automatically on expiry of the time under Clause 6C, or only after forfeiture of the performance guarantee following a hearing under Clause 6D.
- Whether the Central Government's grant of extensions and change of location was open to interference in judicial review.
Provisions considered
- Clause 6C, as amended in 2006, 2016 and 2018, Sugarcane (Control) Order, 1966The 2018 clause permits extension where delay results from court cases relating to land use, environment 'or such other reason'; the litigation against the appellant fell within that phrase. The amendments are procedural and clarificatory and apply retrospectively, so the Control Order in force on the date of extension governed. (¶¶ 7, 9, 10, 22, 26, 29, 37)
- Clause 6D, Sugarcane (Control) Order, 1966De-recognition and lapse of an IEM require forfeiture of the performance guarantee after a reasonable opportunity of hearing; no show-cause notice was ever issued, so the IEM did not lapse. (¶¶ 42, 44)
- Clause 6A and Explanation 4, Sugarcane (Control) Order, 1966The 15 km norm existing on the date of the IEM, confirmed by the aerial distance certificate the High Court held unchallengeable, governs; the State's later 25 km notification applies only to new proposals. (¶¶ 7, 8, 27, 28, 32)
- Section 3, Essential Commodities Act, 1955The Control Order is issued under this section and the Central Government's extensions were exercises of power under it on the State's recommendation. (¶¶ 6, 7, 38)
Held
- Though no interim order was passed, writ petitions disputing the aerial distance created a cloud over the IEM for four years, and an entrepreneur defending permissions cannot be faulted for not making heavy investment pending such lis. On the restitution principle in South Eastern Coalfields, the period of litigation initiated by rivals cannot be used against him and was rightly excluded. (¶¶ 23, 24, 26, 27, 28, 29)
- The High Court's 2014 order declaring the aerial distance certificate not open to challenge was unchallenged, so the High Court in the second round could not apply the 25 km norm; timelines and conditions are fixed by the date of the IEM and subsequent amendments apply only to new factories. (¶¶ 27, 28, 32)
- Judicial review of the Central Government's extension is confined to illegality, irrationality and procedural impropriety (Tata Cellular); absent any finding of arbitrariness, the High Court erred in substituting its view that the appellant was remiss. Frequent extensions, some for periods already expired and all subject to pending litigation, were not objectionable. (¶¶ 30, 31, 39, 40, 41)
- Clause 6C's use of 'shall' does not make lapse automatic. Two steps are required: failure to set up and commence production, then forfeiture of the performance guarantee after a hearing under Clause 6D. Unless the guarantee is forfeited, there is no lapsing of the IEM. (¶¶ 42, 44)
- Sugarcane area reservation was abolished in Maharashtra in 1997 and farmers may supply any mill; competition benefits farmers through timely payment and better service, as the Rangarajan Committee recognised. A competitor's financial interest is no ground to deny a new mill. (¶¶ 45, 46, 47, 48, 50)
Result
Appeals allowed; the High Court's order of 23.07.2021 set aside and the writ petitions dismissed. The period spent in the second round of litigation is also to be excluded in determining the time for setting up the plant and commencing commercial production.