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CASE NO.: Appeal (civil)  1730 of 2007

PETITIONER: M/s. Ojas Industries (P) Ltd

RESPONDENT: M/s. Oudh Sugar Mills Ltd. & Others

DATE OF JUDGMENT: 02/04/2007

BENCH: DR. ARIJIT PASAYAT & S.H. KAPADIA

JUDGMENT: KAPADIA, J.

(Arising out of S.L.P. (C) No.7690 of 2006) WITH Civil Appeal NO.   1731    of 2007 arising out of SLP(C)No.7990/06 Civil Appeal NO.   1732    of 2007 arising out of SLP(C)No.7991/06 Civil Appeal NO.   1735    of 2007 arising out of SLP(C)No.8774/06 Civil Appeal NO.   1734    of 2007 arising out of SLP(C)No.8772/06 Civil Appeal NO.   1733   of 2007 arising out of SLP(C)No.8770/06 T.P.(C) No.421/06 T.P.(C) NO.623/06

Leave granted in petitions for special leave.

In this batch of matters we are required to interpret  Press Note No.12 dated 31.8.1998 issued by Government  of India, Ministry of Industry, concerning de-licensing of  Sugar Industry.

For the sake of convenience we state the facts  occurring in Civil Appeal No.          of 2007 arising out of  S.L.P.(C) No.7690 of 2006 - M/s. Ojas Industries (P) Ltd.   Versus  M/s. Oudh Sugar Mills Ltd. & Others.

Proliferation of Industrial Entrepreneur  Memorandums to block competition is the cause of  dispute.

On 31.8.98 Government of India (for short, ’GOI’)  decided to delete sugar industry from compulsory  licensing under the Industries (Development and  Regulation) Act, 1951 (For short, ’1951 Act’).  In that  Press Note No.12, GOI clarified that in order to avoid  unhealthy competition among sugar factories to procure  sugarcane, a minimum distance of 15 KMs has to be  observed between an existing sugar mill and a new mill  (factory).  Further, the entrepreneur who desires to avail  of the de-licensing of sugar industry was required to file  an Industrial Entrepreneur Memorandum (for short,  ’IEM’) with the Ministry of Industry.  In the said Press  Note it was further clarified that those entrepreneurs who  have been issued Letter of Intent (for short, ’LOI’) for  manufacture of sugar need not file an initial IEM and in  such cases, the LOI Holders shall file Part ’B’ only of the  IEM at the time of commencement of commercial  production.    The Notification dated 11.9.98 was issued under  Section 29B(1) of the said 1951 Act.  It had to be read

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with Press Note No.12 dated 31.8.98.  It was issued to  usher in the policy of de-licensing.

After de-licensing 2232 IEMs were filed till July  2005 out of which 600 IEMs were filed in U.P.

On 13.5.04 M/s. Ojas Industries (P) Ltd. (for short,  ’Ojas’) filed its IEM for setting up a sugar mill at village  Baisagapur, Distt. Lakhimpur Kheri, U.P.  It was  acknowledged by GOI.  Ojas claims to have obtained  permission for purchase of lands under U.P. Zamidari  Abolition & Land Regulation Act.  It claims to have placed  orders for entire plant and machinery from M/s. S.S.  Engineers, Pune in February 2005.  It claims to have  placed an order of the value of Rs.8.65 crores for  construction of the factory building.  It also claims to  have made financial tie-ups with banks and other  financial institutions for meeting expenses of more than  Rs.20 crores.  It claims to have approached U.P. Pollution  Control Board for grant of NOC dated 28.4.05.  It claims  to have obtained such NOC.  Ojas claims to have spent  Rs.20 crores under various Other Heads.  After four days  on 17.5.04, M/s. Oudh Sugar Mills Ltd. (for short,  ’Oudh’) filed its IEM for setting up a sugar mill (factory) at  village Saidpur, Khurd, Distt. Lakhimpur Kheri, U.P.  within 7.2 Kms from the proposed sugar mill of Ojas in  Basaigapur.  This has led to the dispute between the two  companies.    On 23.4.05 Ojas filed its Writ Petition No.7123/05  before the Delhi High Court for setting aside the IEM filed  by Oudh.  On 28.5.05 Oudh filed a writ petition in Delhi  High Court bearing No.9892/05 to set aside the IEM filed  by M/s. Bajaj Hindustan Ltd. for setting up the sugar  mill in Titarpur.   

On 30.6.2005, pursuant to the Orders of the Delhi  High Court, the matter was heard by Chief Director,  Sugar, (GOI) who approved the IEM filed by Ojas.  The  IEM filed by Oudh was disapproved.  Aggrieved by the  decisions of the Chief Director, Sugar, (GOI), Oudh filed  Writ Petition No.11748/05.  On 26.7.05 Oudh filed  another Writ Petition No.12078/05 challenging the IEM  of M/s. Bajaj Hindustan Ltd. for setting up its sugar mill  at village Khambarkhera.

Be that as it may, by the impugned judgment dated  22.12.05 the Division Bench of the   Delhi High Court held that the Notification dated 11.9.98  read with the Press Note No.12 dated 31.8.98 prescribing  15 KMs distance between existing sugar mill and a new  sugar mill did not operate to the prejudice of Oudh and  that it was open to Oudh or any one else to establish a  sugar mill beyond 15 KMs of an existing sugar mill.  It  was held that the Central Government had executive  powers under Article 73 of the Constitution of India to  issue the said Press Note No.12.  It was further held that  the said Press Note, however, applied only to cases where  a new mill (factory) is proposed to be set up within 15  KMs of an existing sugar mill.  According to the  impugned judgment, therefore, in the absence of existing  sugar mill the said Press Note No.12 dated 31.8.98 had  no application.  On facts, it was, therefore, held that Ojas  cannot derive any benefit from the said Press Note No.12  dated 31.8.98.  In the circumstances, by the impugned

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judgment it has been held that the said Press Note  applies only when there is an existing sugar mill.   Accordingly, by the impugned Writ Petition No.7123/05  filed by Ojas for setting aside the IEM filed by Oudh stood  dismissed.  Whereas Writ Petition No.11748/05 filed by  Oudh was allowed and the orders passed by the Chief  Director, Sugar, dated 30.6.05 was set aside.   Consequently, by the impugned judgment Writ Petition  No.12078/05 filed by Oudh challenging the IEM of M/s.  Bajaj Hindustan Ltd. for Khambarkhera was also  dismissed.

Aggrieved by the impugned judgment dated  22.12.05 Ojas have come to this Court by way of civil  appeals.

Before proceeding further we may point out that in  the impugned judgment vide para ’63’ , the High Court  observed that it was always open to the Central  Government to amend Press Note No.12 dated 31.8.98  and provide that if an IEM is filed by one party, then the  subsequent IEM for setting up a sugar mill within 15  KMs of the place indicated by the Earlier IEM will not be  entertained.  This is now precisely done by Union of  India.  It has issued Sugarcane (Control) (Amendment)  Order, 2006 on 10.12.06 inter alia laying down the  effective steps which the applicant is required to take.   The said Sugarcane (Control) (Amendment) Order, 2006  has inserted Clauses 6A to 6E into Sugarcane (Control)  Order, 1966.  We quote hereinbelow the newly added  clauses which read as under: "6A. Restriction on setting up of two sugar  factories within the radius of 15 Kms. \026  Notwithstanding anything contained in clause  6, no new sugar factory shall be set up within  the radius of 15 Kms of any existing sugar  factory or another new sugar factory in a state  or two or more states:

Provided that the State Government may  with the prior approval of the Central  Government, where it considers  necessary and expedient in public  interest, notify such minimum distance  higher than 15 Kms or different  minimum distances not less than 15 Kms  for different regions in their respective  States.

Explanation 1.- An existing sugar factory  shall mean a sugar factory in operation  and shall also include a sugar factory  that has taken all effective steps as  specified in Explanation 4 to set up a  sugar factory but excludes a sugar  factory that has not carried out its  crushing operations for last five sugar  seasons.

Explanation 2.- A new sugar factory shall  mean a sugar factory, which is not an  existing sugar factory, but has filed the  Industrial Entrepreneur Memorandum as  prescribed by the Department of  Industrial Policy and Promotion, Ministry

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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 6C.

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  concerned person 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 institutions; (e)     any other step prescribed by the  Central Government, in this regard  through a notification.

6B. Requirements for filing the Industrial  Entrepreneur Memorandum. \026  

(1)     Before filing the Industrial Entrepreneur  Memorandum with the Central Government,  the concerned person shall obtain a certificate  from the Cane commissioner or Director  (Sugar) or Specified Authority of the concerned  State Government that the distance between  the site where he proposes to set up sugar  factory and adjacent existing sugar factories  and new sugar factories is not less than the  minimum distance prescribed by the Central  Government or the State Government, as the  case may be, and the concerned person shall  file the Industrial Entrepreneur Memorandum  with the Central Government within one  month of issue of such certificate failing which  validity of the certificate shall expire.   

(2)  After filing the Industrial Entrepreneur  Memorandum, the concerned person shall  submit a performance guarantee of rupes one  crore to Chief Director (Sugar), Department of  Food and Public Distribution, Ministry of  Consumer Affairs, Food and Public  Distribution within thirty days of filing the

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Industrial Entrepreneur Memorandum as a  surety for implementation of the Industrial  Entrepreneur Memorandum as a surety for  implementation of the Industrial Entrepreneur  Memorandum within the stipulated time or  extended time as specified in clause 6C failing  which Industrial Entrepreneur Memorandum  shall stand de-recognized as far as provisions  of this Order are concerned.

6C  Time limit to implement Industrial  Entrepreneur Memorandum.-

The stipulated time for taking effective steps  shall be two years and commercial production  shall commence within four years with effect  from the date of filing the Industrial  Entrepreneur memorandum with the Central  Government, failing which the Industrial  Entrepreneur Memorandum shall stand de- recognized as far as provisions of this Order  are concerned and the performance guarantee  shall be forfeited:

Provided that the Chief Director (Sugar),  Department of Food and Public  Distribution, Ministry of Consumer  Affairs, Food and Public Distribution on  the recommendation of the concerned  State Government, may give extension of  one year not exceeding six months at a  time, for implementing the Industrial  Entrepreneur Memorandum and  commencement of commercial production  thereof.

6D. Consequences of non-implementation  of the provisions laid down in clauses 6B  and 6C.-  If an Industrial Entrepreneur  Memorandum remains unimplemented within  the time specified in clause 6C, the  performance guarantee furnished for its  implementation shall be forfeited after giving  the concerned person a reasonable opportunity  of being heard.

6E.  Application of clauses 6B, 6C and 6D to  the person whose Industrial Entrepreneur  Memorandum has already been  acknowledged.-  

(1)     Except the period specified in sub- clause (2) of clause 6B of this Order,  the other provisions specified in  clauses 6B, 6C and 6D shall also be  applicable 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 the clause 6A. (2)     The person whose Industrial  Entrepreneur Memorandum has  already been acknowledged as on

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date of this notification but who has  not taken effective steps as specified  in Explanation 4 to the clause 6A  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 concerned  person shall stand de-recognized as  far as provisions of this Order are  concerned."    

Learned counsel appearing on behalf of Ojas  submitted that the interpretation placed by the Division  Bench of the Delhi High Court on the expression "existing  sugar mill" in the Press Note No.12 will lead to  discrimination.  In this connection, it was submitted that  if in a given case there exists a sugar mill, whose  performance is poor, even then, no new sugar mill  (factory) can be set up within an area of 15 KMs thereof.   According to the learned counsel, this was not the  intention while introducing de-licensing.  Learned  counsel further submitted that the impugned judgment  was erroneous in interpreting the said Press Note.  It was  urged that in a case, even if there is no existing sugar  mill any number of sugar mills can be set up.  According  to the learned counsel, such an interpretation would not  only result in discrimination under Article 14 of the  Constitution of India but it would provide protection to  inefficient existing mills at the cost of the interest of the  farmers in the area.  Learned counsel submitted that if  the impugned judgment is upheld then the existing sugar  mills will get full protection.  They will be assured of  continuous supply of sugarcane whereas the  entrepreneurs proposing to set up new sugar plants of  higher capacities will not get adequate sugarcane for  their sugar mills.  Learned counsel submitted that the  impugned judgment will discourage the new investments  in the sugar industry and the result would be frustration  of the policy of liberalisation.  Learned counsel submitted  that such an interpretation will completely desist the  entrepreneur from setting up a sugar mill in a new area.   Learned counsel submitted that the impugned judgment  should not be upheld since it would lead to disastrous  consequences.  In this connection, it was submitted that  according to the impugned judgment unless and until the  sugar mill becomes an existing sugar mill the said  entrepreneurs shall have no protection from business  rivals who can set up sugar mills in close proximity  creating difficulties for such entrepreneurs for  procurement of basic raw material.  Learned counsel  submitted that under the provisions of the Sugarcane  (Control) Order, 1966 and under the provisions of U.P.  Sugarcane (Regulation of Supply and Purchase) Act,  1953, the Cane Commissioner has been entrusted with  the object of ensuring adequate supply of sugarcane to  the sugar mills.  Learned counsel urged that by reason of  the impugned judgment any number of mills can be set  up in close proximity to each other which would make

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the demand for sugarcane much higher than its supply  and in such a situation allocation by the Cane  Commissioner would become very difficult as he would  not be in a position to allocate the sugar mills adequate  cane for the mills.  Learned counsel urged that under  Clause 6 of the Sugarcane (Control) Order, 1966 framed  under Section 3 of the Essential Commodities Act, 1955,  the Central Government has been empowered to issue  directions for regulation, distribution and movement of  sugarcane to ensure continuous supply of sugarcane to  sugar mills.  In order to avoid unhealthy competition  among the sugar mills and to ensure procurement of  sugar in a systematic manner, the Central Government  has been issuing Policy Directives from time to time in  the form of press note prescribing a minimum distance  between two sugar mills.  In this connection, it was  pointed out that a perusal of various press notes issued  by the Central Government from time to time would show  that the minimum radial distance between two sugar  mills has always been retained in the past depending  upon the cane availability.  Under the impugned Press  Note No.12, the stipulation was 15 KMs.  Therefore,  according to the learned counsel, it was necessary to  retain the minimum radial distance between two sugar  mills so that a given sugar mill having an IEM in the first  instances is assured of adequate supply of raw material.   Learned counsel submitted that reading of various Press  Notes issued by GOI shows that the distance between two  sugar mills has a direct relationship with the availability  of sugarcane.  Learned counsel urged that these aspects  have not been taken into account in the impugned  judgment.  Learned counsel submitted that the High  Court erred in holding that Press Note No.12 would apply  only in cases where there is a mill in existence (existing  mill).  It was submitted that such an interpretation would  lead to chaos.  It was submitted that the result of the  impugned judgment would be that the sugar mills would  be allowed to be set up in close proximity leading to  unhealthy competition and starvation of basic raw  material which would make the mills unviable.  Learned  counsel submitted even after de-licensing it was  necessary to retain the condition of radial Distance,  namely, sufficient distance between two sugar mills  having nexus with the availability of sugarcane in an  area.  In this connection, it was pointed out that  "Distance" has been a relevant Condition for last 20  years.  It was urged that this Condition has got to be  retained even after de-licensing.  As regards IEMs, it was  submitted that under Notification dated 25.7.91 issued  under Section 29B of the 1951 Act, industries exempted  from de-licensing had to file IEMs.  Learned counsel  submitted that the same concept has been continued  even after de-licensing.  Learned counsel pointed out that  after de-licensing, industrial licence was not required but  the Condition of filing IEM embodied in Notification dated  25.7.91 has been retained and, therefore, it has legal  sanctity and validity.  Learned counsel, therefore, urged  that the Distance Condition should be maintained not  only between existing and proposed mill but also between  two proposed mills.  Learned counsel urged that an IEM  gives an entrepreneur a right to take steps for setting up  a sugar mill and without an IEM one cannot proceed to  set up a sugar mill.  Therefore, according to the learned  counsel, Part ’A’ of the IEM was equated with LOI and  Part ’B’ of IEM was equated with industrial licence in

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terms of the Press Note No.12 dated 31.8.98.  According  to the learned counsel, the High Court has failed to  appreciate that in respect of two sugar mills, proposed to  be set up in a new area, mere filing of IEM was not  sufficient but filing of IEM coupled with the effective  steps was necessary.  According to the learned counsel,  IEM plus effective steps to implement such IEM, were the  twin requirements enunciated in the impugned Order  passed by the Chief Director, Sugar, which has been  wrongly set aside by the High Court.  Learned counsel  urged that an IEM filed first in point of time, should be  given primacy over IEM filed subsequently subject to the  condition that effective steps have been taken by the First  IEM Holder within reasonable time.  Learned Counsel  urged that where effective steps have been taken by the  First IEM Holder, all other IEMs filed thereafter and  falling within 15 KMs from that location should be kept  in suspense and if the First IEM Holder fails to take  effective steps then priority should be given to the Second  IEM Holder and so on and so forth.  This, according to  the learned counsel, has not been appreciated by the  Court below.  Applying the above tests to the facts of the  present case, learned counsel submitted that Ojas filed  its IEM on 13.5.04 for setting up a sugar mill at  Baisagapur, it had taken effective steps to implement its  IEM and, therefore, according to the learned counsel, the  Subsequent IEM filed by Oudh, should have been  declared as non est by the High Court.  For the above  reasons, learned counsel submitted that the impugned  judgment needs to be set aside.

On the other hand, learned counsel appearing on  behalf of Oudh submitted that prior to the Sugarcane  (Control) (Amendment) Order, 2006 dated 10.11.2006,  the only restriction was with regard to Distance as  contained in Press Note No.12 dated 31.8.98.  That  Distance was of 15 KMs required to be maintained  between an existing sugar mill and a new sugar mill  (factory).  It was not from one IEM to another IEM.   Learned counsel submitted that under Press Note No.12  in order to preclude a new sugar mill from being set up  there has to be an existing sugar mill within 15 KMs of  the proposed sugar mill.  It is urged, in Order, for a mill  to be regarded as an existing sugar mill, a mere IEM or  effective steps to implement such IEM were not sufficient  but the mill should have become an existing sugar mill.   Therefore, according to the learned counsel, this view  taken by the Delhi High Court was the correct  interpretation of the law existing before 10.11.06.   Learned counsel urged that the Sugarcane (Control)  (Amendment) Order, 2006 by which Clause 6A to 6E  stood inserted in the Sugarcane (Control) Order, 1966  was not retrospective because it lays down new  conditions such as filing of bank guarantee, filing of  distance certificate and also it lays down effective steps of  implementing of IEM.  Therefore, according to the learned  counsel, the said Sugarcane (Control) (Amendment)  Order, 2006, cannot affect the position as it obtained  before 10.11.06.  In the alternative, learned counsel  urged that if this Court is of the view that the aforestated  Sugarcane (Control) (Amendment) Order, 2006  constitutes a bar for setting up new sugar mill in the  sense of the First IEM Holder taking effective steps for its  implementation qua the Subsequent IEM Holders then,  according to the learned counsel, one has to decide as to

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what are these effective steps and what would be the  relevant date for determining whether the effective steps  have been undertaken.  Learned counsel submitted that  the effective steps to be taken by the IEM Holder are set  out in Explanation 4 to Clause 6A.  Learned counsel has  suggested in addition thereto certain other effective steps  which an applicant should take so that unscrupulous  persons are prevented from blocking the sites.  These are  \026 purchase of minimum 50 acres of land for the factory  (mill), placement of firm order for purchase of plant and  machinery for the factory, payment of requisite advance  or opening of letter of credit with suppliers, investment of  at least 25 acres on civil work, sanction of term loans  from banks/financial institutions, submission of Project  Report for sugar factory with details of fund resources  and a timeframe within which effective steps should be  taken failing which the IEM would lapse.

India has adopted the policy of economic reforms,  free trade and liberalization in 1991.  Government has  taken several steps in that direction.  The Licence Raj  has been dismantled in phases.  Sugar industry is  accordingly liberalized.  It has been de-licensed.  The  object being to increase the production of sugar.  The  object being to make the sugar industry competitive in  the world.  The object being continuous supply of  sugarcane to the entrepreneurs proposing to set up new  sugar plants of viable capacities.  The object being  disciplined procurement of sugarcane and sufficient  supply of sugarcane to the mills (factories).  This last  object is the basis of Press Note No.12 dated 31.8.98.  If  sugar mills are allowed to be set up in close proximity  then the demand of sugarcane will be much higher than  supply and in which event the existing sugar mills will be  starved of the sugarcane and will become unviable  consequently the farmers will also suffer.

Before the High Court one of the submissions made  on behalf of the Oudh was that the Notification dated  11.9.98 under Section 29B(1) of the 1951 Act read with  Press Note No.12 dated 31.8.98, did not provide for a bar  for the Subsequent IEM Holder in the face of the First  IEM Holder taking effective steps within the specified  time-limit.  In the impugned judgment (vide para ’65’) the  High Court has stated, while accepting the contention of  Oudh, that the Central Government was free to amend  Press Note No.12 and provide for a bar for Subsequent  IEM Holders from setting up a sugar mill within 15 KMs  of the place where the proposed sugar mill under the  Earlier IEM is proposed to be set up.  When High Court  decided the matter there was no such express bar.   However, by way of Sugarcane (Control) (Amendment)  Order, 2006 dated 10.11.06 a bar is introduced vide  Clause 6A to 6E for setting up a new sugar factory (mill)  by a person taking effective steps after filing IEM.  In  other words, if the First IEM Holder or the Earlier IEM  Holder takes effective steps to implement its IEM then  the Subsequent IEM Holder cannot proceed with his IEM.   If the First or Earlier IEM Holder completes its Projects  successfully then the Remaining IEMs for that area shall  become non est.  They shall, however, remain in  suspense during stipulated period when the Earlier IEM  Holder takes effective steps for implementing its IEM.   Therefore, the very basis of the impugned judgment is  now eliminated.  Hence, we are not required to examine

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once again the validity of the said judgment.   

Suffice it to state, that the Sugarcane (Control)  (Amendment) Order, 2006 shall apply retrospectively to  all cases, including the present cases in which IEMs are  pending.  In this connection, the question which arises  for determination is : firstly, whether the Sugarcane  (Control) (Amendment) Order, 2006 operates  retrospectively and if so whether the effective steps  enumerated in Explanation 4 to Clause 6A are adequate.   In this connection, we have to keep in mind the  conceptual difference between the distance certificate,  the concept of effective steps to be taken by an IEM  Holder and the question of bona fides.  Sugarcane  (Control) (Amendment) Order, 2006 inserts Clauses 6A to  6E in Clause 6 of the Sugarcane (Control) Order, 1966.   It retains the concept of "Distance".  This concept of  "Distance" has got to be retained for economic reasons.   This concept is based on demand and supply.  This  concept has to be retained because the resource, namely,  sugarcane, is limited.  Sugarcane is not an unlimited  resource.  "Distance" stands for available quantity of  sugarcane to be supplied by the farmer to the sugar mill.   On the other hand, filing of bank guarantee for Rs.1 crore  is only as a matter of proof of bona fides.  An  entrepreneur who has genuinely interested in setting up  a sugar mill has to prove his bona fides by giving bank  guarantee of Rs.1 crore.  Further, giving of bank  guarantee is also a proof that the businessman has the  financial ability to set up a sugar mill (factory).   Therefore, giving of bank guarantee has nothing to do  with the Distance Certificate. As far as effective steps are  concerned we may point out that apart from the steps  enlisted in the earlier Notification dated 11.9.98 read  with Press Note No.12 dated 31.8.98, the Sugarcane  (Control) (Amendment) Order, 2006 has laid down such  steps like purchase of required land in the name of the  factory (mill), placement of a firm order for purchase of  plant and machinery for the factory, payment of advance  or opening of letter of credit with suppliers,  commencement certificate of civil work and construction  of building, sanction of requisite term loans from the  banks or financial institutions and any other step  prescribed by the Central Government in this regard.  In  our view Clauses 6A to 6E have been introduced in  Clause 6 of Sugarcane (Control) Order, 1966.  In our view  Clauses 6A to 6E are clarificatory in nature.  There are  certain norms mentioned in the Accounting Standards of  Institute of Chartered Accountants for setting up  industries.  They may be sugar mills, paper mills, textile  mills etc.  When effective steps are enlisted in Sugarcane  (Control) (Amendment) Order, 2006 dated 10.11.06 vide  Explanation 4 to Clause 6A those in-built norms are  made explicit, therefore, Explanation 4 to Clause 6A is  clarificatory.  Therefore, it is retrospective.  There is one  more reason why we hold that the Sugarcane (Control)  (Amendment) Order, 2006 is retrospective.  The Central  Government has taken note of various pending matters  in different courts on the interpretation of Sugarcane  (Control) Order, 1966, Press Note No.12 and the  Notification dated 11.9.98 issued under Section 29B(1) of  the said 1951 Act to put an end to litigations and keeping  in mind the concept of "Distance Certificate" as distinct  from the concept of "effective steps", the Central  Government has issued the Sugarcane (Control)

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(Amendment) Order, 2006.  It is to plug the loophole that  the said Order has been issued on 10.11.06.  In our view,  therefore, the Sugarcane (Control) (Amendment) Order,  2006 is retrospective.  In all pending cases the Central  Government now seeks to put a bar for setting up new  sugar factory (mill) for a limited period during which the  Former or Earlier IEM Holder is required to take effective  steps.  The said Order of 2006 is not putting a ban on  setting up of new units.  It is only giving a priority in the  matter of setting up of new units.  Therefore, the said  2006 Order operates retrospectively.  It will not apply to  mills which are already functioning.  The said 2006  Order will apply only to cases where IEMs are pending in  disputes in various courts.  The said 2006 Order will also  apply after our judgment to those cases which are under  dispute and where milling has not commenced or  permitted to commence.  On behalf of Ojas certain  suggested modifications to Explanation 4 in Clause 6A  have been indicated.  They are stated hereinabove.  They  are worthy of considerations by the Central Government.   It is for the Central Government to incorporate such  modifications as it deems fit keeping in mind the  availability of sugarcane in a given area, the crushing  capacity of the unit, the installed capacity of the plant  and machinery, the nexus with the availability of  sugarcane and the capacity utilization of the mill  (factory).  Before concluding on this issue we may  reiterate that raising of resources and application of  resources by a unit is different from the Condition of  Distance.  The concept of "Distance" is different from the  concept of "setting up of unit" in the sense that setting  up of a unit is the main concern of the businessman  whereas a concept of "Distance" is an economic concept  which has to be taken into account by the Government  because it is the Government which has to frame  economic policies and which has to take into account  factors such as demand and supply.

I.A.No.2 of 2007 in T.P.(C) No.421  This I.A. pertains to matters pending in Allahabad  High Court (Lucknow Bench).  I.A. No.2 of 2007 has been  filed by M/s. Balrampur Chini Mills Ltd. (for short,  ’Balrampur’).  It is for grant of milling permission to its  factory at Kumbhi, Distt. Lakhimpur Kheri (U.P.), which  is complete.  It is submitted on behalf of Balrampur that  the sugarcane crushing season continuous upto 15th May  every year.  The factory is ready to start milling.  Even a  Cane Reservation Order has been made in its favour.   The factory (mill) is ready.  Balrampur has made a huge  investment of Rs.213 crores.  According to Balrampur,  the IEM of Ojas is filed for Bhogotipur, only in order to  block the IEM filed by Balrampur.  Therefore, they pray  that milling permission should be granted to Balrampur  and that this Court should permit them to obtain and  implement such milling permission.  According to  Balrampur, this Court should grant such permission as  it would be in the interest of cane growers, shareholders  and general public.  According to Balrampur no prejudice  will be caused to Ojas if they are given such milling  permission.  According to Balrampur, they are setting up  two mills in Kumbhi and Guleria and if Ojas is unable to  set up two mills in Bhagotipur and in Bijuwa which are  within 15 KMs. from Kumbhi and Guleria respectively,  then they can still go ahead and set up other mills in  Distt. Lakhimpur and, therefore, no prejudice will be

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caused to Ojas.  Balrampur claims to have spent 213  crores at Kumbhi and 152 crores at Guleria.  The  Kumbhi unit is complete.  It is ready for milling activity.      On behalf of Ojas it has been vehemently argued  that Balrampur took the risk of making investment in the  Kumbhi and Guleria Projects despite pendency of matters  in the High Courts.  It is urged that by interim orders  Balrampur was put to notice that they are free to  implement their above two Projects at Kumbhi and  Guleria subject to the outcome of the pending writ  petitions.  It is urged that due to deference to the courts,  Ojas did not proceed further for implementation of their  programme whereas Balrampur has proceeded to  implement their Projects at Kumbhi and Guleria at their  own risk and, therefore, they should not be allowed to  take advantage of fait accompli.

We are of the view that out of two Projects at  Kumbhi and Guleria, Balrampur can be given milling  permission for its factory (mill) at Kumbhi.  In our  present judgment we have taken the view that the  Sugarcane (Control) (Amendment) Order, 2006 operates  retrospectively.  We have also taken the view that in  applying the said 2006 Order there will be a bar on  Subsequent IEM Holders during the specified period  when the Earlier IEM Holder is taking effective steps.  At  the same time, we find that in the case of Kumbhi  substantial investment has been made by Balrampur.   Their Projections are better than Units proposed to be set  up by Oudh.  Moreover, the sugarcane crushing season  ends on 15th May, 2007, we do not want the cane growers  to suffer.  Therefore, we grant milling permission only to  Kumbhi Project.  I.A. No.2 of 2007 is made absolute.   However, Guleria Project shall be governed by the  principles laid down in this judgment, as indicated above.

TO SUM UP: We hold that the Sugarcane (Control) (Amendment)  Order, 2006 imposes a bar on the Subsequent IEM  Holders in the matter of setting up of new sugar mills  (factories) during the stipulated period given to the  Earlier IEM Holders to take effective steps enumerated in  Explanation 4 to Clause 6A of the Sugarcane (Control)  (Amendment) Order, 2006 dated 10.11.2006.  We further  hold that the said 2006 Order operates retrospectively.   We have cleared the Kumbhi Project. All other Projects  falling in various writ petitions in the Allahabad High  Court (Lucknow Bench) will be decided by the High Court  in accordance with the principles laid down in this  judgment.

All civil appeals, transfer petitions and interlocutory  applications accordingly stand disposed of with no order  as to costs.