Court’s Decision
The Bombay High Court (Division Bench of Justices G.S. Kulkarni and Advait M. Sethna) dismissed a writ petition filed under Article 226 challenging the validity and continuation of the Industrial Entrepreneur Memorandum (IEM) originally granted to Jijamata Sugar & Power Industries Ltd., now claimed by Shivneri Sugars Ltd. The petition sought a declaration that the IEM stood automatically de-recognised under Clause 6C of the Sugarcane Control Order (SCO), 1966, for failure to commence production within four years.
The Court, after extensive analysis of facts, statutory provisions, affidavits of the Union of India and Maharashtra State, as well as the conduct of Shivneri, held that the petitioner failed to demonstrate that the IEM was liable to be set aside. The Court accepted the Union Government’s decision recognizing the IEM holder as an “existing sugar factory” as per Explanation 1 to Clause 6A of the SCO, 1966.
Facts
The petitioner, a cooperative sugar factory operating since 1974 in Maharashtra, challenged the legality of IEM No. 2654/SIA/IMO/2003 originally issued to Jijamata Ethanol & Agro Processing Industries Ltd. and later amended in name to Jijamata Sugar & Power Industries Ltd., eventually transferred to Shivneri Sugars Ltd. The petitioner alleged that Shivneri’s unit is within 23 km of its own factory, violating the minimum 25 km distance prescribed under a 2011 State Notification. The petitioner further contended that the IEM stood de-recognized under Clause 6C as no effective commercial production began within four years.
The petitioner relied on correspondence, inspection reports, and site photographs to demonstrate that the respondent had not commenced production. It also cited instances of non-payment of sugarcane purchase tax, absence of statutory licences and alleged false claims regarding minimal sugar production.
Issues
- Whether the IEM dated 18 September 2003 stood automatically de-recognized under Clause 6C of the SCO, 1966?
- Whether Shivneri Sugars Ltd. could claim the benefits of the IEM originally issued to Jijamata Sugar & Power Industries Ltd.?
- Whether commercial production actually commenced within the statutory timeframe?
Petitioner’s Arguments
The petitioner argued that under Clause 6C of the SCO, 1966 (as amended in 2006), the IEM stood automatically de-recognized since no commercial production was commenced within four years. They contended that neither Jijamata nor Shivneri had fulfilled the conditions of “effective steps” under Explanation 4 of Clause 6A. The petitioner placed reliance on survey reports showing distance violations and asserted that any alleged sugar production in 2011–12 was a paper claim unsupported by statutory compliance such as tax payments or excise duties.
The petitioner further alleged that the entire exercise of change in name and ownership was undertaken to bypass legal requirements and that Shivneri’s demolition of the original plant indicated non-utilisation of the IEM.
Respondent’s Arguments
The Union of India submitted that the IEM holder had taken “effective steps” before 17 September 2007 as required under Explanation 4 to Clause 6A and was thus correctly recognised as an “existing sugar mill” via letter dated 22 September 2008. These steps included land purchase, machinery procurement agreements, sanctioned loans, and initiation of civil works. The commencement of production in 2011–12 was further certified by the Maharashtra Cane Commissioner.
Shivneri Sugars Ltd. submitted that it lawfully acquired the mill through registered sale deeds and was granted a change of name in the IEM by due process. It refuted the petitioner’s claims as politically motivated and relied on approvals, government correspondence, and capacity enhancement proposals to validate its compliance.
Analysis of the Law
The Court examined Clause 6A and Clause 6C of the SCO, 1966, particularly the definition of “effective steps” and the mechanism of automatic de-recognition. It held that the government’s recognition of Jijamata as an existing sugar mill in 2008 and subsequent grant of short name and plant code in 2019 were legally valid administrative acts. The Court also considered that the 2006 amendment applied retrospectively and protected genuine IEM holders who had taken effective steps, as clarified in Ojas Industries Pvt. Ltd. v. Oudh Sugar Mills Ltd. [(2007) 4 SCC 623].
Precedent Analysis
- Ojas Industries Pvt. Ltd. v. Oudh Sugar Mills Ltd. – The Supreme Court upheld the retrospective applicability of the 2006 amendment to the SCO and clarified that if an IEM holder takes effective steps within the stipulated period, subsequent IEMs in that area shall become non-est.
- Balrampur Chini Mills Ltd. v. Ojas Industries Pvt. Ltd. – The Court directed the Central Government to amend the SCO to resolve issues arising from distance and operational ambiguities in sugar mill licencing.
- Allahabad High Court in Kisan Sahakari Chini Mills Ltd. and Delhi High Court in Oudh Sugar Mills Ltd. – Clarified that the 15 km distance rule in pre-amendment scenario was directory.
Court’s Reasoning
The Court noted that effective steps had been taken within the four-year period, including land purchase, machinery procurement, and financial arrangements. The decision of the Central Government to treat the IEM holder as an existing sugar mill was not shown to be arbitrary. The Court also found no merit in the allegation that the short production run in 2011–12 was fabricated. The Government’s administrative record and the multiple affidavits filed showed due consideration of all relevant facts.
The demolition and proposed re-establishment of a higher-capacity unit did not amount to abandonment of the IEM but was part of modernisation efforts.
Conclusion
The Court held that:
“The entire challenge as made by the petitioner is not supported by any cogent material to demonstrate that the decisions taken by the Central Government in recognising the respondent sugar mill as an existing sugar factory was either arbitrary or illegal.”
The writ petition was dismissed with no relief granted.
Implications
This judgment reiterates judicial deference to administrative decisions backed by proper record and procedure, especially under economic regulations such as the Sugarcane Control Order. It also underscores the relevance of “effective steps” in protecting IEMs from de-recognition, offering stability to long-term industrial projects.
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