Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL  APPEAL NO.5856 of 2005

M/s. Bajaj Hindustan Ltd. .. Appellant(s)

-versus-

Sir Shadi Lal Enterprises Ltd. & Anr. . ..        Respondent(s)

WITH

SLP © No.1398 of 2006 Civil Appeal No.5857 of 2005 Civil Appeal No.5858 of 2005

J U D G M E N T  

SLP © No.1398 of 2006

1. As prayed by learned counsel Mr. Parijat Sinha this petition  

is dismissed as withdrawn.

Civil Appeal No.5856 of 2005

2. These  petitions  have  been  filed  against  the  judgment  and  

order dated 24.08.2005 in Civil Misc. Writ Petition No.36685 of  

2004 of the High Court of Judicature at Allahabad

3. By that decision the High Court has quashed the Press Note  

Number  12  dated  31.8.1998  and  Notification  SO  808(E)  dated  

11.9.1998, issued by the Central Government, by which the Sugar  

Industry  was  de-licensed  under  Section  29B  of  the  Industries  

(Development and Regulation) Act, 1951 (hereinafter referred to  

as ‘the Act’.)

4. As  a  consequence,  the  High  Court  has  debarred  the  

respondent number 6 from establishing a sugar industry without  

obtaining a licence under Section 11 of the Act.

5. The High Court  has  also cancelled the permission,  if  any,  

granted  to  the  respondent  number  5  to  6  for  purchasing  and/or  

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acquiring  land  for  the  purposed  of  establishing  new  sugar  

industries without licence.

6. It is submitted by learned counsel for the appellant that the  

effect  of  the  impugned  judgment  and  order  quashing  of  the  

Notification dated 11.9.1998 and the Press Note dated 31.8.1998 is  

that the sugar industry in India has virtually been thrown back into  

the era of ‘License Raj’, nullifying the efforts of the Government  

of India to open up the economy to prospective investors.  Also, all  

the sugar industries established throughout India after 11.9.1998  

(as per the available data they are 100 in number) have become  

illegal.  Industrial development, particularly in the sugar producing  

States, may well come to a grinding halt. An investment of about  

Rs.4000  crores  in  the  sugar  industry  in  U.P.  alone  has  been  

jeopardized.  The petitioner herein alone has invested about Rs.600  

crores  in  the  sugar  industry  in  the  State  of  U.P.  after  the  said  

Notification and Press note were issued.  Further, the petitioner has  

committed  an investment  of  an amount  of  Rs.700 crores in  the  

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sugar  industry  in  U.P.   It  is  submitted  that  lacs  of  farmers  

throughout India and particularly in the State of U.P. will suffer as  

they would be forced to sell their cane at lesser price to the existing  

sugar mills and those who are not even able to crush their assigned  

quantity  of  sugarcane  and make  timely  payment  of  cane  to  the  

farmers, besides rendering thousands of workers directly employed  

in sugar factories jobless.  Also, lacs of families indirectly attached  

with  industries  ancillary  to  the  sugar  industry  will  be  severely  

affected as a result.

7. The petitioner acting bonafide and after complying with all  

the  requirements  stipulated  in  the  Press  Note/Notification,  is  

setting up seven Sugar Factories at various places in U.P. with an  

aggregate investment of nearly Rs.1300 crores with a capacity of  

7000  tonnes  crushed  per  day  (TCD)  each.   The  petitioner  has  

already completed and commenced production in one factory at  

Kinouni, Meerut, which the petitioner had set up in a record seven  

months period on 5.11.2004 and further three factories are already  

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completed and ready to commence production in September, 2005  

including the one which is under challenge in the writ petition in  

which  the  impugned  judgment  has  been  passed.   Further,  the  

petitioner  is  expecting  to  complete  the  commissioning  of  

production in another three factories as fast as possible.  The three  

factories are ready to operate before the on set of the forthcoming  

crushing season in September, 2005 to enable the farmers to take  

full  economic advantage thereof.   The remaining three factories  

shall commence production in 2006.  The petitioner has already  

spent  about  Rs.600  crores  on  the  purchase  of  land,  plant  and  

machinery  and  other  miscellaneous  expenditure.   Further,  the  

construction  of  buildings  of  the  other  three  sugar  factories  and  

integrated distillery for production of Ethanol etc. is in full swing  

on  which  a  further  sum  of  Rs.700  crores  is  committed  to  be  

invested for which the petitioner had also made GDR issue of US$  

110  million  and  committed  in  the  international  market.   It  is  

submitted that all the projects of the petitioner would be affected  

by the impugned judgment.

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8. It is submitted that in the State of U.P., the sugar industry is  

one  of  the  most  important  industries,  with  sugarcane  being  the  

chief  cash  crop.   Thousands  of  people  have  been  provided  

employment  in  this  industry  alone.   Nearly  half  of  India’s  

sugarcane area is situated in U.P. alone, which constitutes roughly  

42% of the total sugarcane production in the country.  However,  

despite  adequate  availability  of  sugarcane  area,  U.P.  still  lags  

behind Maharashtra in the production of sugar.  Even though the  

demand of  sugar  in  the  country  has  increased  manifold  but  the  

sugar industry in U.P. has remained stagnant over a long period of  

time due to various reasons including sickness of uneconomic and  

unviable  units  mainly  in  the  Government  and  the  cooperative  

sector.  Due to low sugarcane crushing capacity, the farmers were  

forced to sell their cane to less remunerative uses.  The petitioner’s  

sugar projects have brought a new hope to the farmers at large.    

9. Sugar,  is  item  number  25  of  the  first  Schedule  of  the  

Industries (Development and Regulation) Act,  1951.  Hence,  no  

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one could set up a sugar industry without a licence as per Section  

11 of the Act.

10. The  Industries  (Development  and  Regulation)  Act  was  

passed in 1951.  The statements of objects and reasons of the Act  

states as follows :      

“The object of this Bill is to provide the Central  Government  with  the  means  of  implementing  their  industrial  policy  which  was  announced  in  their  Resolution No.1(3)-44(13) 48, dated 6th April, 1948 and  approved  by  the  Central  Legislature.   The  Bill  brings  under Central control the development and regulation of  a number of important industries, the activities of which  affect  the  country  as  a  whole  and the  development  of  which must be governed by economic factors of all-India  import.   The planning of future development on sound  and  balanced  lines  is  sought  to  be  secured  by  the  licensing  of  all  new  undertakings  by  the  Central  Government.  The Bill confers on Government power to  make rules for the registration of existing undertakings,  for  regulating  the  production  and  development  of  the  industries  in  the  Schedule  and  for  consultation  with  Provincial Governments on these matters.”………….  

11. Section 2 of the Act states as follows :

“2.  Declaration  as  to  expediency  of  control  by  the  Union  – It is hereby declared that it is expedient in the  public  interest  that  the  Union  should  take  under  its  control the industries specified in the First Schedule.”  

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12. Section 3(i) of the Act states as follows :

“(i)  “scheduled  industry”  means  any  of  the  industries  specified in the First Schedule.”        

13. Sugar is mentioned in item no.25 of the First Schedule to the Act.

14. The  historical  background  is  that  up  to  about  1930  there  were  

practically no sugar industries in India and we had to import all our sugar  

from foreign countries like West Indies, Jawa, etc.  Hence around 1930 the  

British Government invited some businessmen and requested them to set up  

sugar  industries  in  India  so  that  we can  produce  our  own sugar.   These  

businessmen told the British Government that they were willing to set up  

such industries provided they were assured of regular supply of sugarcane.  

It may be mentioned that sugarcane is the main raw material for manufacture  

of sugar.  If an adequate supply of sugarcane was not available to the sugar  

mills  the  mills  would  have  to  close  down  entailing  heavy  losses  to  the  

proprietors.   The Government  accepted  this  request  and framed laws for  

ensuring a regular supply of sugarcane to any sugar mill established in India  

and made various regulations for the sugar industry.

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15. The 1951 Act placed the sugar industry in the First Schedule to the  

Act, which meant that no sugar industry could be set up without a licence  

from the Central Government.

16. Since independence the situation has totally changed in India.  Now  

India has a heavy industrial base and also has several sugar mills.  Hence the  

earlier  regulatory  laws  relating  to  the  sugar  industry,  including  the  

requirement of a licence,  have evidently served their  purpose and are no  

longer required and may in fact be obstructing the growth of industry in our  

country now.  Hence the policy of liberalization began in the early 1990s  

and it appears that it was in pursuance of the liberalization policy that the  

impugned Press Note and Notification were issued.

17. A perusal of the background in which de-licensing of sugar industry  

was done shows that it was a well considered step which was done having  

regard to the stage of development of the industry.  This background is:

a) On  24th July  1991,  the  Government  of  India  announced  its  

liberalized “Industrial Policy 1991”.

b) On  25th July,  1991,  the  first  notification  i.e.  Notification  

No.477(E)  came to  be issued by virtue  of  which 20 out  of  the  38  

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Scheduled industries were taken out of the purview of Section 10, 11,  

11A & 13 of the Act.  The structure of this  notification was that it  

appended three negative lists (Schedule I, II and III) and the scheduled  

industries not specified in these three lists were obviously within the  

scope of the exemption.   

These lists were changed from time to time during the period  

1991-2010 and as things stand at present only a handful of industries  

now remain in these negative lists.

c) As  far  as  the  sugar  industry  is  concerned,  a  Parliamentary  

Committee  was  appointed  which  recommended  de-licensing  of  the  

sugar  industry  as  early  as  in  1996.   Later,  pursuant  to  certain  

directions of the Allahabad High Court yet another Committee was  

appointed (the Mahajan Committee), which also supported reform of  

the  licensing  system.   In  August  1998,  considering  the  

recommendations of these two reports the Government of India issued  

Press Note 12 dated 31.8.1998 de-licensing the sugar industry, subject  

to the condition that there would be a minimum of 15 km distance  

between two sugar mills.   

The Press Note was then followed by the formal notification on  

11.9.1998, issued under Section 29B(1) of the Act.   

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18. The Press Note and Notification read as follows :-

“PRESS NOTE

Subject : De-licensing of Sugar industry.

1. The  Government  has  further  viewed  the  list  of  industries  under  compulsory  licensing  and  has  decided  to  delete  sugar  industry  from the list  of  industries  requiring  compulsory  licensing  under  provisions  of  the  Industries  (Development  and  Regulation) Act, 1951.  However, in order to avoid  unhealthy  competition  among  sugar  factories  to  procure sugarcane,  a minimum of 15 KM would  continue to be observed between an existing sugar  mill  and a new mill  by exercise of power under  Sugarcane (Control) Order, 1966.

2. The entrepreneurs who wish to avail themselves of  the  de-licensing  of  sugar  industry  would  be  required  to  file  an  Industrial  Entrepreneurs  Memoranda  (IEM)  with  the  Secretariat  of  Industrial Assistance in the Ministry of Industry as  laid down for all de-licensing Industries in terms of  the Press Note dated 2nd August, 1991, as amended  from time to time.

3. Entrepreneurs  who  have  been  issued  letter(s)  of  intent (LOI) for manufacture of sugar need not file  an initial IEM.  In such cases, the LOI holder shall  only  file  part  B  of  the  LOI  at  the  time  of  commencement of commercial production against  the LOI issued by them.  It is, however, open to  entrepreneurs to file an initial IEM (in lieu of the  LOI/Industrial  Licence  held  by  them)  if  they  so  desire, whenever any variation from the conditions  and  parameters  stipulated  in  the  LOI/Industrial  Licence is contemplated.”  

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“NOTIFICATION

(266)  Ministry  of  Industry  (Department  of  Industrial  Policy and Promotion) Notification No.S.O.808(E) dated  September 11,  1998 published in the Gazette  of India,  Extra, Part II, Section 3 (ii) dated 14th September, 1998  p.2, no.599 (F.No.10(13)/96 I.P.).

In exercise of the powers conferred by sub-section (1) as  Section  29-B  of  the  Industries  (Development  and  Regulations)  Act,  1951  (65  of  1951),  the  Central  Government  hereby  makes  the  following  further  amendment  in  the  notification  of  the  Government  of  India  in  the  Ministry  of  Industry  (Department  of  Industrial  Development  Number  S.O.477(E)  dated  the  25th July, 1991, namely :-

In Schedule II to the said notification, item 4,  relating  to  Sugar  and  the  entries  thereunder  shall be omitted.”

19. Section 29B(1) of the Act states :

“29-B.  Power to exempt in special cases :

(1)   If  the  Central  Government  is  of  opinion,  having  regard  to  the  smallness  of  the  number  of  workers  employed  or  to  the  amount  invested  in  any  industrial  undertaking or  to the desirability  of  encouraging small  undertakings generally or to the stage of development of  any scheduled  industry,  that  it  would  not  be  in  public  interest to apply all or any of the provisions of this Act  thereto,  it  may by  notification  in  the  Official  Gazette,  exempt, subject to such conditions as it may think fit to  impose, any Industrial undertaking or class of industrial  undertakings  or  any  scheduled  industry  or  class  of  scheduled industries as it may specify in the notification  from the operation of all or any of the provisions of this  Act or any rule or order made thereunder,”    

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20. It may be mentioned that after the impugned judgment of the High  

Court dated 24.08.2005, several developments have taken place relating to  

the sugar industry which have a substantial effect on the issues involved in  

these appeals.  These are as follows :  

(i) The High Court of Delhi in a case reported as  Ojas  

Industries P. Ltd. vs. Union of India & Ors 2006 (86) DRJ 593  

upheld the validity of the Press Note dated 31.08.98 being a policy  

of the Government of India under Article 73 of the COI.  Therefore  

Delhi  High  court  upheld  the  validity  of  the  Press  Note  dated  

31.08.98 which was quashed by the Allahabad HC on 24.08.05.

(ii) Thereafter the Government of India in exercise of its  

power under Section 3 of the Essential  Commodities  Act,  1955  

amended the Sugarcane (Control) Order, 1966 by inserting Clauses  

6A to 6E vide the Sugarcane (Control) Amendment Order, 2006,  

inter alia, laying down the “effective steps” which the applicant is  

required to take such as purchase of required land in the name of  

the mill, payment of advance and opening of LOC 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 steps prescribed by the Central  

Government in this regard.   

(iii) This  Court  by  its  judgment  dated  02.04.07  in  Ojas  

Industries P. Ltd. vs.  Oudh Sugar Mills Ltd & Ors (2007) 4  

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SCC  723  considered  the  Press  Note  dated  31.08.98,  the  

amendment  of  Sugarcane  Control  Order,  2006  and  the  

liberalization policy of the Government of India in sugar industry.  

This  Court  after  analyzing the  provisions  of  the  Press  Notes  in  

respect of prescribing minimum distance between two sugar mills,  

and the new Sugarcane Control Order, 2006 held that the defect  

pointed  out  by  the  Delhi  High  Court  in  paragraph  63  of  its  

judgment  has  been  removed  by  the  Government  of  India  by  

bringing  in  the  amendment  in  2006.   This  Court  held  that  this  

amendment is clarificatory in nature and retrospective in operation  

and shall apply to all cases pending in various courts.

21. In  view  of  the  judgment  of  this  Court  in  Ojas  Industries  (supra)  

upholding  the  validity  of  the  Press  Note  prescribing  distance  norms and  

subsequent  amendments  in  2006  in  Sugarcane  Control  Order  1966  and  

making it retrospective, the issues involved in the present case have been  

substantially decided.  The challenge of the writ petitioner in the High Court  

was based on the setting up of a sugar mill in its vicinity (though beyond 15  

kms  away)  because  of  the  policy  of  de-licensing  prescribed  under  

Notification  dated  11.09.98  issued  in  exercise  of  powers  under  Section  

29(B) (1) of the IDR Act, 1951.   This Court has upheld the distance norms  

i.e. a minimum distance of 15 kms between two mills retrospectively.  The  

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main  thrust  of  the  petitioner’s  challenge  to  the  de-licensing  policy  thus  

disappears.

22. It is settled law that in the areas of economics and commerce, there is  

far  greater  latitude available  to the executive than in other  matters.   The  

Court cannot sit in judgment over the wisdom of the policy of the legislature  

or the executive.

23. Thus in Balco Employees’ Union (Regd.)  vs.  Union of India and  

Ors. 2002(2) SCC 333 it was observed (vide paragraph 92 and 93) :

“92. In a democracy, it is the prerogative of each elected  Government to follow its own policy. Often a change in  Government may result in the shift in focus or change in  economic  policies.  Any  such  change  may  result  in  adversely  affecting  some  vested  interests.  Unless  any  illegality is committed in the execution of the policy or  the  same  is  contrary  to  law  or  mala  fide,  a  decision  bringing about change cannot per se be interfered with by  the court.   

93. Wisdom and advisability  of  economic  policies  are  ordinarily not amenable to judicial review unless it can  be  demonstrated  that  the  policy  is  contrary  to  any  statutory provision or the Constitution. In other words, it  is  not  for  the  courts  to  consider  relative  merits  of  different economic policies and consider whether a wiser  or better one can be evolved.”…………….

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24. In the same decision in paragraph 39 it was observed :

“39. In  Premium  Granites vs.  State  of  T.N.,  1994(2)  SCC  691 while  considering  the  Court’s  powers  in  interfering with the policy decision,  it  was observed at  page 715 as under: (SCC para 54)

“54.  It  is  not  the  domain  of  the  Court  to  embark  upon  the  unchartered  ocean  of  public policy in an exercise to consider as to  whether a particular public policy is wise or  a better public policy can be evolved. Such  exercise must be left to the discretion of the  executive  and legislative  authorities  as  the  case may be.”

25. In paragraph 42 of the aforesaid decision this Court quoted from its  

earlier decision in M.P. Oil Extraction  vs.  State of M.P. 1997(7) SCC 592  

as follows :

“……………………The executive  authority  of  the  State must be held to be within its competence to frame a  policy  for  the  administration  of  the  State.  Unless  the  policy  framed  is  absolutely  capricious  and,  not  being  informed by any reason whatsoever, can be clearly held   to  be arbitrary  and founded on mere ipse  dixit  of  the   executive  functionaries  thereby  offending  Article  14 of   the  Constitution  or  such  policy  offends  other   constitutional provisions or comes into conflict with any   statutory  provision,  the  Court  cannot  and  should  not   outstep its limit and tinker with the policy decision of the   executive  function  of  the  State.  This  Court,  in  no  uncertain  terms,  has  sounded  a  note  of  caution  by  indicating  that  policy decision is  in  the  domain of  the  executive authority of the State and the Court should not  embark on the  unchartered ocean of  public  policy and  should  not  question  the  efficacy  or  otherwise  of  such  policy so long the same does not offend any provision of  the statute or the Constitution of India. The supremacy of  each  of  the  three  organs  of  the  State  i.e.  legislature,  executive  and  judiciary  in  their  respective  fields  of  

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operation needs to be emphasized. The power of judicial  review of the  executive  and legislative  action must  be  kept within the bounds of constitutional scheme so that  there  may not  be any occasion to  entertain  misgivings  about the role of the judiciary in outstepping its limit by  unwarranted judicial activism being very often talked of  in these days. The democratic set-up to which the polity  is so deeply committed cannot function properly unless  each of the three organs appreciate the need for mutual  respect and supremacy in their respective fields.”

                                                        (emphasis added)

26. The same view has been taken by this court in  Ugar Sugar Works  

Ltd.  vs.  Delhi Administration and Ors. (2001) 3 SCC 635 (vide para 18),  

Bhavesh D. Parish and Ors.  vs.  Union of India and Anr. (2000) 5 SCC  

471 (vide para 23 and 24), Netai Bag and Ors.  vs.  State of West Bengal  

and Ors. (2000) 8 SCC 262 (vide para 20), etc..

27. In P.T.R. Exports (Madras) Pvt. Ltd.  vs.  Union of India and Ors.  

1996(5) SCC 268 (vide para 3 and 5) this Court held that the power to frame  

a policy by executive or legislative decision included the power to withdraw  

the same.

28. In the present case the de-licensing has been done under Section 29B  

of the Act and we see no illegality in the same.

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29. In our opinion the High Court has placed an erroneous interpretation  

on the language of Section 29B.  Section 29B provides that having regard to  

any of the four specified factors, if the Central Government is of the opinion  

that it would not be in public interest to apply “all or any” of the provisions  

of this  Act to a scheduled industry,  it  may by notification in the official  

gazette  exempt (conditionally  or  otherwise)  any industrial  undertaking or  

any class of industrial undertakings, or any scheduled industry or class of  

scheduled industries.  The four specified factors on the basis of which the  

power may be exercised are as follows :

a) the smallness of the number of workers employed or

b) the amount invested in any industrial undertaking or

c) the desirability of encouraging small undertakings generally or

d) the stage of development of any scheduled industry.

30. A plain reading of Section 29B shows that having regard to the stage  

of development of any schedule industry if the Central Government is of the  

opinion that there should be an exemption from some or all of the provisions  

of the Act, it can issue an appropriate notification for this purpose.  Sub-

section 2 of the Section 29B also confers upon the Central Government an  

express power of cancellation of such exemption.  In our opinion sufficient  

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guidelines have been provided by the legislature for the Government in this  

connection.  The power conferred under Section 29B is in our opinion not  

tainted by the vice of excessive delegation because the essential legislative  

policy  is  specified  in  the  preamble  to  the  IDR  Act  and  is  writ  large  

throughout  the provisions  of  the Act.   The grounds on which exemption  

from licensing can be granted – one of them being the stage of development  

of the industry – are also specified in Section 29B.  The legislative policy  

having been clearly stated, in our opinion there is no excessive delegation.  

See in this connection P.J. Irani  vs.  State of Madras (1962) 2 SCR 169at  

pages 179-180, Sitaram Bishambar Dayal  vs.  State of U.P. (1972) 4 SCC  

485 (vide para 5 and 7),  Mahe Beach Trading Co. and Ors.  vs.  Union  

Territory  of  Pondicherry  and  Ors. (1996)  3  SCC 741  (vide  para  13),  

State of Tamil Nadu  vs.  K. Sabhanayagam (1998) 1 SCC 318 (vide para  

14, 19, 20 and 21),  Consumer Action Group  vs.  State of Tamil Nadu  

(2000)  7  SCC  425  (vide  para  5-18,  41  reviews  case  law  on  delegated  

legislation right from F. N. Balsara) and Kishan Prakash Sharma and Ors.  

vs.  Union of India and Ors. (2001) 5 SCC 212 (vide para 18-20).

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31. The  legislative  history  of  Section  29B  clearly  establishes  the  

legislative intention to confer a wide power of exemption upon the Central  

Government.

a) Section  28,  as  was  originally  enacted,  conferred  upon  the  

Central  Government,  in  general  terms,  the  power  to  exempt  any  

scheduled industry or any industrial undertaking from the operation of  

all or any provisions of this Act.  There was no further provision of  

any  parliamentary  control  (by  way  of  placing  the  exemption  

notifications  before  parliament  for  its  approval  or  otherwise)  

contemplated in the said original Section.

b) Amendments were made to the IDR in 1953 when Section 29B  

was inserted in substitution of Section 28.  The amended provision  

contemplated  the  grant  of  exemption  on  the  four  factors  indicated  

hereinbefore.  However, no power of reservation for the Small Scale  

Sector  was  contemplated  in  these  provisions.   In  1956  further  

amendments were made by way of insertion of Sub-section 2, which  

confers the power of cancellation of exemptions.

c) The Central Government sought to make reservation of certain  

industries for the Small Scale Sector.   The Bombay High Court in  

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Shree Vindhya Paper Mills  Case  AIR (1983) Bom 270 held that  

Section 29B confers power to exempt, but not to reserve.  Hence it  

was  held  that  such  reservation  was  ultra-vires  Section  29B.   To  

overcome the effect of this judgment Section 29B was amended again  

in  1984  by  inserting  the  provisions  of  Sub-section  2(A)  to  2(H)  

including a validating provision for validating all reservations made  

on or from 19th February, 1970.  In the amended provision, Section  

2(H)  contemplated  laying  before  each  House  of  Parliament,  the  

notified orders made under Sub-section 2(A).  It is significant that no  

similar  requirement  was  contemplated  even  then,  in  relation  to  

notified orders issued under Sub-Section (1) granting exemption.

32. The  High  Court  has  in  the  impugned  judgment  held  that  the  de-

licensing could only be done by the legislature and not by the executive.  We  

do not agree.  It is well settled that the executive power of Union of India is  

co-extensive  with  the  legislative  power  vide  Article  73(1)  of  the  

Constitution.  Hence in our opinion it was not necessary to amend the Act to  

de-license  the  sugar  industry.   The  notification  under  Section  29B  was  

sufficient for this purpose.

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33. In the impugned judgment the High Court has observed :

“Licensing is a part of regulation of the scheduled  industry.  Therefore licensing policy of the Government  cannot  be  said  not  to  be  in  the  public  interest.   De- licensing policy largely affects the interest of the people.  Somebody may say for socialism or somebody may say  for globalization, but the thought of majority people has  to be reflected in the House by the majority vote.  Then  and then alone the policy can be accepted as a law by its  amendment.  Therefore, without ascertaining the pros and  cons on that line mere issuance of notification by the pen  of the executive is an action without jurisdiction and as  such illegal.”    

34. With respect we cannot agree with this observation.  There is nothing  

in the 1951 Act which required a notification under Section 29B(1) to be  

approved by Parliament.  Also, whether it is in the public interest to issue  

such a notification is ordinarily for the Government to decide, and the Court  

should exercise judicial restraint in this connection.  Whether there should  

be licensing of an industry or not is for the executive authorities to decide.

35. The High Court has further observed :

“The necessity of de-licensing came in the mind of  the Government by the passage of time since when the  waves of liberalization started coming.  The Government  was  considering the  same and possibly  for  this  reason  reports from the Advisory Committees were sought for.  But  after  placement  before  the  Lok  Sabha  and  Rajya  Sabha  what  prompted  them  not  to  place  before  the  Parliament,  but  issue  a  Press  Note  and  Notification  

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directly  omitting  the  sugar  industry  from  the  list  of  compulsorily licensable industry is fishy state of affairs.  Therefore,  the  elements  of  illegality,  unfair  play,  adopting back door process, arbitrariness, malafides, and  abuse of power cannot be ruled out.”     

36. With respect to the above observation we may say that the High Court  

has  probably  overlooked  that  the  Lok  Sabha  and  Rajya  Sabha  together  

constitute Parliament in India.  Also, as already stated above, the 1951 Act  

does  not  require  a  notification  under  Section  29B(1)  to  be  approved  by  

Parliament.  Hence there was nothing fishy about the impugned notification.  

To say that  elements  of illegality,  unfair play etc.  cannot be ruled out  is  

really acting on conjectures and surmises, not on evidence.

37. The High Court has held that exemption from licensing can be granted  

under  Section  29B to  small  industries  but  not  to  large  industries.   With  

respect  we cannot  agree.   A perusal  of  Section  29B(1),  which  has  been  

quoted  above,  shows that  a  notification  under  the  said  provision  can  be  

issued in respect to four categories.  Smallness of the industry, is only one of  

such categories.  The fourth category viz. ‘the stage of development of any  

scheduled industry’ is very wide, and thus gives wide power to the Central  

Government to de-license even large industries.   

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38. In his dissenting judgment in New State Ice Co.  vs.  Liebmann 285  

U.S.  262  (1932)  Mr.  Justice  Brandeis,  the  celebrated  Judge  of  the  U.S.  

Supreme Court, observed that the Government must be left free to engage in  

social experiments.  Progress in the social sciences, even as in the physical  

sciences,  depends  on “a  process  of  trial  and error”  and Courts  must  not  

interfere with necessary experiments.  In the same decision Justice Brandeis  

also observed :

“To  stay  experimentation  in  things  social  and economic is a grave responsibility.  Denial of  the right to experiment may be fraught with serious  consequences  to  the  Nation.”  (See  also  ‘The  Legacy  of  Holmes  and  Brandeis’  by  Samuel  Konefsky).     

39. In  the  Constitution  bench  decision  of  the  Supreme  Court  in  Shri  

Sitaram Sugar Co. Ltd.  vs.  Union of India AIR 1990 SC 1277 it was  

observed :

“What is best for the sugar industry and in what manner  the  policy  should  be  formulated  and  implemented,  bearing in mind the fundamental object of the statute viz.  supply and equitable distribution of essential commodity  at fair prices in the best interest of the general public is a  matter for decision exclusively within the province of the  Central  Government.   Such  matters  do  not  ordinarily  attract the power of judicial review.”

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40. It was held in the above decision as well as in India Cement Ltd.  vs.  

Union  of  India AIR  1991  SC  724  that  even  if  some  persons  are  at  a  

disadvantage  and  suffered  losses on  account  of  formulation  and  

implementation  of  the  Government  policy  that  is  not  by  itself  sufficient  

ground for interference by the Court.

41. In Secretary of Agriculture  vs.  Central Roig Refining Co. (1949)  

338 US 604 (617): 94 Law Ed. 381 to 392, Mr. Justice Frankfurter of the  

U.S. Supreme Court observed :

“Congress was  confronted with the formulation of  policy peculiarly within its wide swath of discretion.  It  would be a  singular  intrusion  of  the  judiciary  into  the  legislative  process  to  extrapolate,  restrictions  upon  the  formulation  of  such  an  economic  policy  from  those  deeply rooted notions of justice which the Due Process  Clause expresses………….”

42. We should not be understood to have meant that the judiciary should  

never interfere with administrative decisions.  However,  such interference  

should be only within narrow limits e.g. when there is clear violation of the  

statute  or  a  constitutional  provision,  or  there  is  arbitrariness  in  the  

Wednesbury sense.  It is the administrators and legislators who are entitled  

to  frame  policies  and  take  such  administrative  decisions  as  they  think  

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necessary in the public interest.  The Court should not ordinarily interfere  

with policy decisions, unless clearly illegal.

43. Economic  and fiscal  regulatory  measures  are  a  field  where  Judges  

should encroach upon very warily as Judges are not experts in these matters.  

The  impugned  policy  parameters  were  fixed  by  experts  in  the  Central  

Government, and it is not ordinarily open to this Court to sit in appeal over  

the decisions of these experts.  We have not been shown any violation of law  

in the impugned notification or Press Note.

44. The  power  to  lay  policy  by  executive  decisions  or  by  legislation  

includes power to withdraw the same unless it is by mala fide exercise of  

power, or the decision or action taken is in abuse of power. The doctrine of  

legitimate  expectation  plays  no  role  when  the  appropriate  authority  is  

empowered to take a decision by an executive policy or under law.  The  

court  leaves  the  authority  to  decide  its  full  range  of  choice  within  the  

executive or legislative power.  In matters of economic policy, it is settled  

law that the court gives a large leeway to the executive and the legislature.  

Granting licences for import or export is an executive or legislative policy.  

The Government would take diverse factors for formulating the policy in the  

overall larger interest of the economy of the country.  When the Government  

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is satisfied that change in the policy was necessary in the public interest it  

would be entitled to revise the policy and lay down a new policy.

45. In Prag Ice & Oil Mills  vs.  Union of India AIR 1978 SC 1296 the  

Supreme Court observed :

“We do not think that it is the function of the Court  to sit in judgment over such matters of economic policy  as must necessarily be left to the government of the day  to  decide.   Many of  them are matters  of  prediction  of  ultimate results on which even experts can seriously err  and  doubtlessly  differ.   Courts  can  certainly  not  be  expected to decide them without even the aid of experts.”

46. In  Shri Sitaram Sugar Co. Ltd.  vs.  Union of India (1990) 3 SCC  

223 the Supreme Court observed :

“Judicial review is not concerned with matters of  economic  policy.   The  Court  does  not  substitute  its  judgment for  that  of  the  legislature  or  its  agents  as  to  matters within the province of either.  The Court does not  supplant the view of experts by its own views.”

It must be remembered that certain matters are by their nature such as best  

be left to experts in the field.  This Court does not have the technical and  

administrative expertise in this respect.

47. In the words of Chief Justice Neely :

“I  have  very  few  illusions  about  my  own  limitations as a Judge.  I am not an accountant, electrical  engineer,  financer,  banker,  stockbroker  or  system  

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management analyst.  It is the height of folly to expect  Judges  intelligently  to  review  5000  page  record  addressing the intricacies of a public utility operation.  It  is not the function of a Judge to act as a super board, or  with the zeal of a pedantic school master substituting its  judgment for that of the administrator.”    

48. In our opinion there should be judicial restraint in fiscal and economic  

regulatory measures.  The State should not be hampered by the Court in such  

measures  unless  they  are  clearly  illegal  or  unconstitutional.  All  

administrative decisions in the economic and social spheres are essentially  

ad  hoc  and  experimental.   Since  economic  matters  are  extremely  

complicated  this  inevitably  entails  special  treatment  for  distinct  social  

phenomena.  The State must therefore be left with wide latitude in devising  

ways  and  means  of  imposing  fiscal  regulatory  measures,  and  the  Court  

should not, unless compelled by the statute or by the Constitution, encroach  

into this field.

49. In our opinion, it will make no difference whether the policy has been  

framed by the legislature or the executive and in either case there should be  

judicial restraint.  The Court can invalidate an executive policy only when it  

is clearly violative of some provisions of the Statute or Constitution or is  

shockingly arbitrary but not otherwise.

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50. As held by this Court in Divisional Manager, Aravali Golf Club &  

Anr.  vs.   Chander Hass & Anr. JT (2008) 3 SC 221, the Court must  

maintain  judicial  restraint  and  not  ordinarily  encroach  in  the  domain  of  

executive or legislature.

51. In our opinion the impugned Press Note and Notification were validly  

issued under Section 29B of the Act.  Hence the impugned judgment cannot  

be sustained and it is hereby set aside.   

52. The appeal is allowed.  No costs.

Civil Appeal Nos. 5857/2005 & 5858/2005

53. In view of our order passed in Civil Appeal No.5856 of 2005, these  

appeals stand disposed of.  No costs.

……………………………..J. (Markandey Katju)

…………………………….J. (Gyan Sudha Misra)

New Delhi; November 29, 2010.

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