TaxTMI 
TaxTMI 
2017 (5) TMI 1509
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....Act') contains the provisions whereby certain industries mentioned in the First Schedule to the said Act are brought under the control of the Union Government. It mentions, vide Entry 25 of the 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 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 Gov....
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....e basis of sucrose content of sugarcane. 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 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 capacity 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 respect of down-stream units for the use of molasses, i.e., industrial alcohol, etc. will be given readily. B. Applications for licenses will be initially screened by the Screening Committee of the Ministry of Food. While considering such applications, the comments of the State Government/Union Territory Administration concerned would also be obtained. The State Government/Union Territory Administratio....
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....ish 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 before the new policy was announced vide Press Note-12 dated August 31, 1998, 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 (IEM) 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 which was so stipulated in Press Note dated August 31, 1988, i.e., by administrative decision. On June 05, 2006, 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 ce....
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.... processed, a significant 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 10, 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(1) to 6D were made applicable by virtue of Clause 6E to industries whose 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 Saundatti 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 issued its No Objection Certificate for establishment of the sugar factory at village Saundatti. (c) The Director of Industries informed the Appellant on May 03, 2007 that its project of establishing a 3000 TCD plant, 12 MW Co-generation Plan....
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....itions were dismissed by an order dated February 10, 2010 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, 2010 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, 2010, 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, 2010 was issued by the Government of India 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, 2010 to the Chief Director, Sugar, detailing t....
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.... For this purpose on July 19, 2007 the Government notified tenders for giving this factory by way of lease. 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. 1 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 10, 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. 1 which is now running Raibagh Sahakari factory and has now taken a position that since Raibagh Sa....
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....ll 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 petitions. Significantly, the Survey of India 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. 15. 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 continued. 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 converting 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 t....
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....able to the date of issuance of the order i.e. November 10, 2006. The Union of India also pointed out in its counter affidavit that in the case of M/s. Ojas Industries Pvt. Ltd., this Court held that the said amendment was retrospective in operation and also highlighted the consequence of non-implementation of IEM within the period stipulated. Since four years time to commence the commercial production was provided in the Amendment Order, 2006 and this amendment was held to be retrospective by this Court, advice of the Additional Solicitor General of India was sought as to whether the Bank Guarantees given by such persons should be accepted or not. The Additional Solicitor General of India in his letter dated June 18, 2007 advised the Government that the Department should not accept the Bank Guarantees from the first or earlier persons whose IEMs were acknowledged in the years 1998/1999/2000 i.e. prior to June, 2003 and who had not taken effective steps. He further advised that Bank Guarantees can only be accepted from the first or earlier IEM holders in terms of Clause 6E of the Control Order, 2006 if the time limit of four years, as prescribed in Clause 6C has not expired. The Un....
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....s convened under the Chairmanship of the Secretary, Commerce & Industries Department, on May 12, 2006. It was noticed that the Taluk Agricultural Officer had reported that the total potential of sugarcane growth is 23.22 lakh tones per year and that the necessity of the Appellant was merely 5 lakh tone per year. It was also noticed that in view of the closure of Raibag Sahakari Sakkare Karkhane, sugarcane growers of the said area were forced to supply sugarcane to Doodhganga Sahakari Sakkare Karkhane and Halasiddanatha Sahakara Sakkare Karkhane. Those two factories also were unable to receive the sugarcane so grown, resulting in the sugarcane farmers being forced to carry their sugarcane to the neighbouring State of Maharashtra, which has counterproductive of the interest of the farmers in general. It was also pointed out that thereafter notices were issued to Doodhganga Sahakari Sakkare Karkhane as well as Raibag Sahakari Sakkare Karkhane for another meeting which was held on 04.06.2007 wherein the Managing Director of Raibag Sahakari Sakkare Karkhane concurred with the recommendation made by the Deputy Commissioner and Doodhganga Sahakari Sakkare Karkhane also issued no objection....
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....writ petitions which are as follows: (1) Whether Shivashakti Sugars has set up a sugar factory at Saundatti Village in accordance with law in as much as (a) is there a valid industrial entrepreneur memorandum filed in accordance with the Sugarcane Control Order; (b) is the new sugar factory established beyond 15 kms from the existing sugar mills viz. Doodaganga Sugar Mills and Raibagh Sugar Mills; (c) the distance certificate obtained is in accordance with law; (d) after filing of the IEM whether effective steps have been taken in terms of Explanation IV to Clause 6A of the Sugarcane Control Order such as: (i) whether the land required for setting up the industry is acquired; (ii) whether civil construction and building was commenced within the stipulated period of two years; (iii) whether firm order for plant and machinery and the letter of credit was within two years period; (iv) whether requisite finance has been arranged (2) If effective steps are not taken within the stipulated period of two years, whether IEM stands de-recognised? (3) Whether the order of extension passed by the....
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....al amount was spent by the Appellant on the establishment of the factory and Appellant had taken all possible steps and sanctions from various Authorities, it should not be made to suffer the closure of the factory since the factory of the Appellant is in business from the year 2011. In nutshell, following issues have been raised for consideration: (a) Whether Clause 6A of the Sugarcane Control Order, 1966 (as amended in 2006) can be made applicable to an entrepreneur, who has been granted an IEM prior to the amendment on November 10, 2006 and whether the judgment of this Court in the case of Ojas Industries case, insofar as it holds Clause 6A to be retrospective, is per incuriam? (b) Whether assuming that Clause 6A is applicable to an IEM holder, prior to the 2006 amendment, would this Clause be applicable in the present case as M/s. Raibagh Sahakari Sakkare Karkhane Niyamit was not an existing sugar factory (within the meaning of explanation 1 to Clause 6A)? (c) Whether the High Court was correct in holding that the Appellant did not take effective steps (as per explanation 4 to Clause 6A), within the time frame specified under Clause 6C of the Sugarcane Control Order, 1....
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....existing sugar factory, but has filed the Industrial Entrepreneur Memorandum as prescribed by the Department of Industrial Policy and Promotion, Ministry of Commerce and Industry in the Central Government and has submitted a performance guarantee of rupees one crore to the Chief Director (Sugar), Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution for implementation of the Industrial Entrepreneur Memorandum within the stipulated time or extended time as specified in Clause 6-C. Explanation 3.-- The minimum distance shall be determined as measured by the Survey of India. Explanation 4.-- The effective steps shall mean the following steps taken by the person concerned to implement the industrial Entrepreneur Memorandum for setting up of sugar factory-- (a) purchase of required land in the name of the factory; (b) placement of firm order for purchase of plant and machinery for the factory and payment of requisite advance or opening of irrevocable letter of credit with suppliers; (c) commencement of civil work and construction of building for the factory; (d) sanction of requisite term loans from banks or financial in....
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....ndustrial Entrepreneur Memorandum has already been acknowledged.-- (1) Except the period specified in Sub-clause (2) of Clause 6-B of this order, the other provisions specified in clauses 6-B, 6-C and 6-D shall also be application to the person whose Industrial Entrepreneur Memorandum has already been acknowledged as on date of this notification but who has not taken effective steps as specified in Explanation 4 to Clause 6-A. (2) The person whose Industrial Entrepreneur Memorandum has already been acknowledged as on date of this notification but who has not taken effective steps as specified in Explanation 4 to Clause 6-A shall furnish a performance guarantee of rupees one crore to the Chief Director (Sugar), Department of Food and Public Distribution, Ministry of Consumer Affairs, Food and Public Distribution within a period of six months of issue of this notification failing which the Industrial Entrepreneur Memorandum of the person concerned shall stand derecognised as far as provisions of this order are concerned. 25. The aforesaid provisions stipulate the steps which an entrepreneur has to take in an establishment of a sugar factory. These provisions also mention tim....
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....ar factory that has taken all effective steps as specified in explanation 4. The third part provides that a sugar factory shall not be considered as an existing sugar factory if 'a sugar factory that has not carried out its crushing operations for the last five sugar seasons'. It is submitted that if a sugar factory, is not 'in operation' on the date when a new sugar mill applies for an IEM, the old sugar factory, shall not be considered as an existing sugar mill. 28. The learned Counsel for Respondent No. 1 heavily relied upon the reasoning in the impugned judgment of the High Court to support his case. There appears to be force in the aforesaid submissions of the Appellant. Requirement of Explanation 1 to Clause 6A is that in order to qualify as an existing sugar mill, it needs to crush for five consecutive years. We find that the High Court has wrongly recorded that the requirement is of crushing for any of the one season out of five and this has led to error on the part of the High Court in holding that M/s. Raibagh Sahakari was an existing sugar factory. 29. Another aspect which becomes relevant in this behalf (and would also have bearing while deciding i....
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....ution is not intended to facilitate avoidance of obligations voluntarily incurred. At the same time, it was observed that the licensees are not precluded from seeking to enforce the statutory provisions governing the contract. It must, however, be remembered that we are dealing with parties to a contract, which is a business transaction, no doubt governed by statutory provisions. [Reference may also be made to the decision of this Court in Asstt. Excise Commr. v. Issac Peter (1994) 4 SCC 104.] While examining complaints of violation of statutory Rules and conditions, it must be remembered that violation of each and every provision does not furnish a ground for the court to interfere. The provision may be a directory one or a mandatory one. In the case of directory provisions, substantial compliance would be enough. Unless it is established that violation of a directory provision has resulted in loss and/or prejudice to the party, no interference is warranted. Even in the case of violation of a mandatory provision, interference does not follow as a matter of course. A mandatory provision conceived in the interest of a party can be waived by that party, whereas a mandatory provisi....
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....e as "effective' steps as 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 applied first on January 27, 2010 which was granted and thereafter second extension was granted by the Union of India till June, 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. Even Government of Karnataka had recommended the Appellant's case for extension. State government had also highlighted the public purpose behind this project, which was for the welfare of the farmers as well. (iii) The Appellant took various steps for setting up of this factory from time to time which have been taken note of above. These include purchase of land, placement of firm order for plant and machinery and payment of advance in that behalf, commencement of civil constru....
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....ctors, 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. 37. It has been recognised for quite some time now that law is an inter disciplinary subject where interface between law and other sciences (social sciences as well as natural/physical sciences) come into play and the impact of other disciplines of law is to be necessarily kept in mind while taking a decision (of course, within the parameters of legal provisions). Interface between law and economics is much more relevant in today's time when the country has ushered into the era of economic liberalization, which is also termed as 'globalisation' of economy. India is on the road of economic growth. It has been a developing economy for number of decades and all efforts are made, at all levels, to ensure that it becomes a fully developed economy. Various measures 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....
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....ffective remedies for breach of contract... ^The second corollary of the Coase Theorem is that where, despite the law's best efforts, market transaction costs remain high, the law should simulate the market's allocation of resources by assigning property rights to the highest-valued users. An example is the fair-use doctrine of copyright law, which allows writers to publish short quotations from a copyrighted work without negotiating with the copyright holder. The costs of such negotiations would usually be prohibitive; if they were not prohibitive, the usual result would be an agreement to permit the quotation, and so the doctrine of fair use brings about the result that the market would bring about if market transactions were feasible. In fact, in certain branches of law there is a direct impact of economics and economic considerations play predominant role, which are even recognised as legal principles. Monopoly laws (popularly known as 'Antitrust Laws' in USA) have been transformed by economics. The issues arising in competition laws (which has replaced monopoly laws) are decided primarily on economic analysis of various provisions of the Competition....
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....n turn escalate the cost thereof, which may not be in public interest. Relevant paragraphs from the said judgment read as under: 11. When a writ petition is filed in the High Court challenging the award of a contract by a public authority or the State, the court must be satisfied that there is some element of public interest involved in entertaining such a petition. If, for example, the dispute is purely between two tenderers, the court must be very careful to see if there is any element of public interest involved in the litigation. A mere difference in the prices offered by the two tenderers may or may not be decisive in deciding whether any public interest is involved in intervening in such a commercial transaction. It is important to bear in mind that by court intervention, the proposed project may be considerably delayed thus escalating the cost far more than any saving which the court would ultimately effect in public money by deciding the dispute in favour of one tenderer or the other tenderer. Therefore, unless the court is satisfied that there is a substantial amount of public interest, or the transaction is entered into mala fide, the court should not intervene Under A....
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.... opposite party in consequence of an interim order. Otherwise public detriment may outweigh public benefit in granting such interim orders. Stay order or injunction order, if issued, must be moulded to provide for restitution. xx xx xx 24. Dealing with interim orders, this Court observed in CCE v. Dunlop India Ltd. (1985) 1 SCC 260] (SCR 190 at p. 196) that an interim order should not be granted without considering the balance of convenience, the public interest involved and the financial impact of an interim order. Similarly, in Ramniklal N. Bhutta v. State of Maharashtra: (1997) 1 SCC 134] the Court said that while granting a stay, the court should arrive at a proper balancing of competing interests and grant a stay only when there is an overwhelming public interest in granting it, as against the public detriment which may be caused by granting a stay. Therefore, in granting an injunction or stay order against the award of a contract by the Government or a government agency, the court has to satisfy itself that the public interest in holding up the project far outweighs the public interest in carrying it out within a reasonable time. The court must also take into account th....