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CASE NO.: Appeal (civil)  4425 of 2007

PETITIONER: M/S DHAMPUR SUGAR (KASHIPUR) LTD

RESPONDENT: STATE OF UTTRANCHAL & Ors

DATE OF JUDGMENT: 21/09/2007

BENCH: C.K. THAKKER & ALTAMAS KABIR

JUDGMENT: J U D G M E N T ARISING OUT OF SPECIAL LEAVE PETITION (CIVIL) NO. 4731 OF 2006

C.K. THAKKER, J.

1.              Leave granted. 2.              The present appeal is filed by the appellant- original petitioner against the judgment and final order  dated December 23, 2005 passed by the High Court of  Uttranchal at Nainital in Writ Petition No. 564 of 2004  (M/B) by which the Division Bench of the High Court  dismissed the petition filed by the writ-petitioner. 3.              The appellant-writ-petitioner filed a petition in  the High Court of Uttranchal at Nainital by invoking  Article 226 of the Constitution against the respondents  for an appropriate writ, direction or order quashing and  setting aside relaxation in Clause (ka) of Notification  dated November 15, 2003 issued by the Cane  Development & Sugar Industries Development,  Government of Uttranchal, also quashing an order  issuing licence for Power Crusher dated February 17,  2004 issued in favour of respondent No. 4; as also  quashing an order dated January 22, 2004 issued by  Secretary (Ganna Cheeni), Government of Uttranchal.  A  Writ of Mandamus was also sought by the appellant  directing respondent Nos. 1 to 3 to estimate the  requirement of sugarcane of the appellant on the basis of  6250 Tonnes Crushing Capacity (TCC).  A further prayer  was made to quash and set aside the order dated  September 25, 2004 passed by the Government of  Uttranchal dismissing the appeal filed by the appellant  herein. FACTUAL MATRIX 4.              To appreciate the controversy raised in the  present appeal, few relevant facts may be noted.  The  appellant is a Company registered under the Companies  Act, 1956.  It owns a sugar factory at Kashipur in the  State of Uttranchal. It was set up in the year 1936.  The  Company is engaged in the manufacture, sale and supply  of sugar.  It is the case of the appellant that M/s Indian  Glycols Limited (\023IGL\024 for short) submitted an application  in the year 2003 for grant of licence for Power Driven  Crusher for the manufacture of rab from sugarcane.  The  application was, however, rejected by the Sugarcane  Commissioner. According to the appellant, the Sugarcane  Commissioner took the said decision as per the Licencing  Policy of the Government whereunder a new licence to  Khandsari Unit could not be granted in the reserved area  of the existing sugar mills.  Since the application of IGL

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was in the reserved area of the appellant, it could not be  granted.  According to the appellant, however, the State  Government vide its order dated November 15, 2003,  modified its earlier sugar policy and the Government was  empowered to relax the limitation laid down in para (ka)  of the Government Order in certain cases.  Immediately  after the amendment in the policy, IGL submitted fresh  application on November 18, 2003 for grant of licence for  rab manufacturing unit.  IGL intended to manufacture  rab from sugarcane juice.  The said application was  allowed by the Licencing Authority, i.e. Sugarcane  Commissioner by an order dated February 17, 2004.   According to the appellant, the proposed site of the new  unit of respondent No. 4-IGL fell in the reserved area of  sugar mill of the appellant.  No such licence, therefore,  could have been granted to IGL.  The Sugarcane  Commissioner as well as the State Government observed  that the new unit would not adversely affect adequate  and sufficient supplies of sugarcane to the sugar mills in  the reserved area and hence, limitation in para (ka) could  be relaxed.  According to the appellant, the factual  position was totally ignored by respondent Nos. 1 to 3  and the action was illegal, unlawful, arbitrary and mala  fide since the respondents wanted to oblige IGL at the  cost of interest of the appellant.

DECISION OF HIGH COURT 5.              The High Court dismissed the petition inter  alia holding that all the contentions raised by the  appellant were ill-founded.  According to the Court,  sugarcane produced in the reserved area was available to  the sugar factory.  It was also observed by the Court that  as per the bonding policy, adequate supply was ensured  so far as the appellant factory was concerned and hence,  it had no occasion to make any grievance against grant of  licence in favour of Respondent No. 4 \026 IGL.  The Court  observed that it was a matter of policy and when there  was change of policy on the part of the Government in  granting licence, it could not have been interfered with  since the appellant failed to convince the Court that such  policy was arbitrary, unreasonable or violative of  statutory provisions.  The Court also held that under the  U.P. Sugarcane (Purchase Tax) Act, 1961, grant of licence  was the rule and rejection an exception.  As the relevant  conditions of law had been observed and the application  was made by respondent No. 4 for grant of licence, by  allowing the application and granting licence, no illegality  was committed by respondent-Authorities and such order  could not be set aside.  On the basis of the above  findings, the High Court dismissed the writ petition filed  by the appellant.  The said order passed by the High  Court is challenged by the appellant by filing the present  appeal. 6.              On March 24, 2006, notice was issued by this  Court.  The matter was thereafter adjourned from time to  time.  Affidavits and further affidavits were filed.  On  December 4, 2006, the matter was ordered to be placed  for hearing.  On May 3, 2007, we have heard the learned  counsel for the parties.

CONTENTIONS OF PARTIES 7.              The learned counsel for the appellant  contended that the change in licencing policy effected by  the Authorities was arbitrary, unreasonable and contrary  to law. It was submitted that no licence could have been

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granted to respondent No. 4- IGL and the said action was  mala fide and had been taken by the authorities in  colourable exercise of power with a view to extend  undeserving benefit to IGL.  It was also submitted that  the High Court was wholly in error in dismissing the  petition filed by the appellant on the ground that the  entire sugarcane produced in the reserved area of sugar  factory of the appellant was available and no prejudice  would be caused to it.  It was the case of the appellant- Company from the beginning that in the area reserved for  appellant-factory, no licence could have been granted to  any other factory particularly when it had adversely  affected supply of sugarcane to the appellant-factory.   The High Court was not right in holding that the  appellant did not make strong demand for more than 51  lakh tones and supply of requisite quantity was ensured.   Looking to the figures supplied by the appellant, it was  clearly proved that establishment of new unit of  respondent No. 4 would prejudicially affect the appellant  and the Company would not be able to get adequate and  sufficient sugarcane from sugarcane growers.  It was  urged that even if it is assumed for the sake of argument  that policy could be changed and exemption could be  granted by the authorities to any unit, such exemption  and/or relaxation could not be allowed only with a view  to favour a particular party and no such action could be  sustained in law.  On that ground also, the action is  liable to be set aside.   Moreover, under 1961 Act, the  Authorities were obliged to consider as to whether  relaxation of conditions were necessary and expedient in  \021public interest\022.  Since, there is no such satisfaction  which is reflected in the order, there is total non- application of mind on the part of the authorities and the  order is liable to be quashed.  According to the learned  counsel, the approach of the authorities was not correct  in granting licence to respondent No. 4.  The authorities  considered availability of sugarcane in the \021whole State\022  as against availability of sugarcane in the \021area\022.  What  was relevant was not availability of sugarcane in the  State, but availability in the respective areas which was  material. If the said fact is considered, it is clearly  established that though the appellant was in need of  much more quantity of sugarcane, it was not             made available and the appellant had to close down  certain units due to non-availability of sugarcane.   Unfortunately, however, the said consideration was  totally overlooked by the authorities and even the High  Court did not consider that aspect in its proper  perspective.  On all these grounds, it was submitted that  the appeal deserves to be allowed and all actions taken  by the State Authorities are liable to be set aside by  ordering cancellation of licence granted in favour of  respondent No. 4 \026 IGL. 8.              The learned counsel for the respondents  supported the order passed by the Authorities\026  respondent Nos. 1 to 3 and the decision of the High  Court.  So far as the State Authorities are concerned, it  was submitted that policy decisions were taken by the  State from time to time as regards sugarcane policy.   Earlier, as per the policy in existence, respondent Nos. 4  could not be granted licence since the object mentioned  in the application was manufacture of rab and for  manufacture of alcohol, and as per the policy, no licence  could be granted for the said purpose.  The application  was, therefore, rejected.  Thereafter the policy was

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changed and in accordance with the changed policy,  respondent No. 4 applied for licence which was granted  and there is no illegality therein.  Allegations of mala fide  and/or colourable exercise of power on the part of  respondent Nos. 1 to 3 were emphatically denied by the  respondents and it was submitted that all actions were  taken by the Authorities after considering the relevant  laws applicable to the case on hand and a decision was  taken.  It was also submitted that in the order issued in  favour of respondent No. 4 \026 IGL, it was expressly stated  that the unit (respondent No. 4) will not purchase  \021bonded cane\022.  It was also stated that there would be no  possibility of adverse effect of cane supply to the sugar  mill of the appellant.  On the contrary, one more option  would be available to the farmers of cane supplied.  It  was thus in larger public interest, submitted the learned  counsel, that such a decision was taken. The High Court  was satisfied as to the legality of such action and rightly  did not interfere with it in exercise of power of judicial  review and no case has been made out to interfere with  the said order.  The appeal, therefore, deserves to be  dismissed. 9.              The learned counsel for respondent No. 4\026IGL  supported the arguments advanced by the learned  counsel for the State.  He further submitted that if a  licence has been granted to respondent No. 4, appellant  had no ground to make grievance that no such licence  could have been granted to IGL. So far as availability of  sugarcane to appellant-Company is concerned, it is  ensured.  If it is so, no prejudice would be caused to the  company.  There is no violation of any provision of law on  the basis of which appellant can object grant of licence in  favour of respondent No. 4. IGL has not been given or  allowed any specific area.  On the contrary, it was  expressly stated that respondent No. 4 has to cater its  need without disturbing and/or curtailing sugarcane  supply to the appellant-Company.  Precisely because of  that condition, respondent No. 4 was allowed to purchase  sugarcane from other areas.  It was also submitted that  correct reading of relevant provisions of 1961 Act clearly  indicate that normally licence should be granted unless a  finding is recorded that it would not be in public interest  to grant such licence.  No such finding has been recorded  and it could not be said that grant of licence to  respondent No. 4, had adversely affected public interest.   If by taking into consideration all the facts and  circumstances in their entirety, the relevant provisions of  law and change of policy, a licence is granted by the  authorities in favour of respondent No. 4 without  disturbing supply of sugarcane to the appellant, it cannot  be said that the action taken by respondent-Authorities  was illegal, unlawful or otherwise objectionable.  The  High Court was, therefore, fully justified in dismissing  the petition and the said order requires no interference  by this Court in exercise of discretionary and equitable  jurisdiction under Article 136 of the Constitution.

STATUTORY SCHEME GOVERNING SUGAR AND SUGARCANE

10.             Before we deal with contentions raised by the  parties before us, it would be appropriate if we peruse  relevant statutory provisions relating to sugar and  sugarcane. \021Sugarcane\022 is an essential commodity as  defined in Section 2(b) of the Essential Commodities Act,  1955. In the leading decision Ch. Tika Ramji & Ors. etc. v.

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State of Uttar Pradesh & Ors., (1956) 1 SCR 393 : AIR  1956 SC 676, this Court held that the Essential  Commodities Act included within the definition of  \021essential commodity\022 \021food-crops\022 which would include  sugarcane. Again, in A.K. Jain v. Union of India & Ors.,  (1970) 1 SCR 673 : AIR 1970 SC 267, following Tika  Ramji, the Court held that Section 2 of the Essential  Commodities Act provided that sugarcane would be an  \021essential commodity\022 within the meaning of the Act and  hence cultivation and sale of sugarcane could be  regulated by law. 11.             The Industries (Development and Regulation)  Act, 1951 declared certain industries as controlled  industries. Section 2 of the said Act enacts that it is  expedient in the public interest that the Union should  take under its control, the industries specified in the  First Schedule. The First Schedule, inter alia, included  \021sugar\022 industry as one of the controlled industries. In  M/s Triveni Engineering Works Ltd. & Anr. v. Union of  India & Ors., AIR 1996 All 420, the High Court of  Allahabad held that the sugar industry is a controlled  industry. The Government is exercising control on the  sugarcane at all levels, namely; of production,  distribution, pricing as also on the production and  marketing of finished product of sugar. There are certain  Central and State Legislations and Control Orders  relating to sugar and sugarcane. The first one is the  Sugarcane Act, 1934 (Act No. XV of 1934) which is a  Central Act. It regulates the price of sugarcane intended  for the use of sugar factories. It empowers the State  Government to declare any area as controlled area and to  fix a minimum price for purchase of sugarcane in that  area. Section 3 of the Essential Commodities Act  empowers the Central Government to issue order  providing for regulating or prohibiting the production,  supply and distribution of any essential commodity if it is  of the opinion that it is necessary or expedient so to do  for maintaining or increasing supply of any essential  commodity or in securing equitable distribution and  availability at fair price. In exercise of the said power, the  Central Government framed the Sugarcane (Control)  Order, 1966. Clause 2 thereof defines important terms  such as \021factory\022, \021khandsari sugar\022, \021khandsari unit\022,  \021crusher\022, \021power crusher\022, \021producer of khandsari sugar\022,  \021reserved area\022, etc. Whereas Clause 3 enables the  Central Government to fix \021minimum price of sugarcane  payable by producer of sugar, Clause 4 provides for  minimum price of sugarcane payable by producers of  khandsari sugar. Clause 6 empowers the Central  Government to regulate distribution and movement of  sugarcane. The said clause is relevant and reads thus: 6. Power to regulate distribution and  movement of sugarcane.\027(1) The Central  Government may, by order notified in the  official Gazette.\027

(a)  reserve any area where sugarcane is grown  (hereinafter in this clause referred to as  \021reserved area\022) for a factory having regard  to the crushing capacity of the factory, the  availability of sugarcane in the reserved  area and the need for production of sugar,  with a view to enabling the factory to  purchase the quantity of sugarcane  required by it;

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(b)     determine the quantity of sugarcane which  a factory will require for crushing during  any year;

(c)     fix, with respect to any specified sugarcane  grower or sugarcane growers generally in a  reserved area, the quantity or percentage  of sugarcane grown by such grower or  growers, as the case may be, which each  such grower by himself, or, if he is a  member of a co-operative society of  sugarcane growers operating in the  reserved area, through such society, shall  supply to the factory concerned;

(d)     direct a sugarcane grower or a sugarcane  growers\022 co-operative society, supplying  sugarcane to a factory, and the factory  concerned to enter into an agreement to  supply or purchase, as the case may be,  the quantity of sugarcane fixed under  paragraph (c);

(e)     direct that no gur (jaggery) or khandsari  sugar or sugar shall be manufactured from  sugarcane except under and in accordance  with the conditions specified in the licence  issued in this behalf;

(f)     prohibit or restrict or otherwise regulate  the export of sugarcane from any area  (including a reserved area) except under  and in accordance with a permit issued in  this behalf.

(2)     Every sugarcane grower, sugarcane  growers\022 co-operative society and factory, to  whom or to which an order made under  Paragraph (c) of sub-clause (1) applies, shall be  bound to supply or purchase, as the case may  be, that quantity of sugarcane covered by the  agreement entered into under the paragraph  and any willful failure on the part of the  sugarcane grower, sugar-cane growers\022 co- operative society or the factory to do so, shall  constitute a breach of the provisions of this  Order :

       Provided that where the default  committed by any sugarcane growers\022 co- operative society is due to any failure on the  part of any sugarcane grower, being a member  of such society, such society shall not be  bound to make supplies of sugarcane to the  factory to the extent of such default.

12.             Clause 7 of the Order deals with power of the  Central Government to license power crushers,  khandsari units and crushers and to regulate the  purchase of sugarcane. It states that the Central  Government may by order direct that in a reserved area  (i) no sugarcane shall be purchased for crushing by a  power crusher; (ii) no sugarcane or sugarcane juice shall  be purchased for crushing or for manufacture of gur,

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shakkar, gul, jaggery, rab or khandsari sugar, as the  case may be, by a crusher not belonging to a grower or a  body of growers of sugarcane or by a khandsari unit in  the area except under and in accordance with a permit  issued by the Central Government in that behalf. Clauses  8, 9 and 9A empower the Central Government to issue  directions to producers of khandsari sugar, power  crushers, khandsari units, crushers and co-operative  societies to call for information, to enter and search any  premises where any accounts, books, registers or other  documents, belonging to or under the control of a  producer of sugar or his agent, or an owner of a crusher,  a power crusher or a khandsari unit or an agent of such  an owner, are maintained or kept for safe custody.  Clause 11 enables Central Government to delegate its  powers to be exercised by any officer or authority of the  Central Government or by State Government or any  officer or authority of a State Government. The Central  Government vide a notification dated July 16, 1966,  delegated the powers under clauses 6, 7, 8 and 9 to the  State Government. In exercise of the said power, the  State of Uttar Pradesh issued U.P. Khandsari Sugar  Manufacturer\022s Licensing Order, 1967. The Preamble of  the order states that the power to regulate the  manufacture of khandsari sugar by open pan process  including bels exercisable by Central Government has  been delegated to the State Government under Sugarcane  (Control) Order, 1966. It was also stated that the State  Government was of the opinion that it was necessary and  expedient for regulating manufacture of khandsari sugar  by open pan process including bels, that in exercise of  the delegated powers it was pleased to frame the  Licensing Order, 1967. The Order defines relevant terms  in Clause 2, such as, \021assigned area\022 to mean \021an area  assigned to a factory under Section 15 of the Uttar  Pradesh Sugarcane (Regulation of Supply and Purchase)  Act, 1953\022; \021manufacturer\022 to mean \021a person who uses a  power crusher, bel or centrifugal in the process of  manufacture of khandsari sugar and includes a person  who prepares rab for conversion into khandsari sugar\022;  \021power crusher\022 as \021crusher working with the aid of diesel,  electrical or steam power and engaged or ordinarily  engaged in crushing sugarcane and extracting juice  therefrom for the manufacture of gur, shakkar, gul,  jaggery, rab or khandsari sugar\022. Clause 3 provides for  grant of licence. Clause 4 prescribes the period for which  licences are to be issued. Clauses 6 and 7 lay down  conditions for suspension or cancellation of licence and  powers of the licensing authority respectively. 13.             No manufacturer, without obtaining from the  licensing authority a licence in the prescribed form, can  undertake or carry on any process concerned with the  manufacture of khandsari sugar by means of a power  crusher, bel or centrifugal. Sub-clause (4) of Clause 3 is  also relevant and the material part reads thus: (4) An application for the grant of a licence  shall be disposed of by the Licensing Authority  expeditiously and shall not be rejected except  where the application has not been made on  the prescribed form or is incomplete or is not  accompanied by proof of the payment of the  requisite fee or the Licensing Authority is of  the opinion that it is necessary or expedient so  to do in the public interest with a view to\027

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(a) Regulating the Khandsari Sugar     Manufacturing Industry in the best  interest of the industry; or

(b)     avoiding uneconomic concentration of  khandsari units in any area; or

(c)     ensuring in a reserved or assigned area  adequate supplies of sugarcane to a  factory.

Provided that \005      \005.           \005.           \005..

14.             It is thus clear that an application for the  grant of licence by the licensing authority cannot be  rejected except where (i) such application has not been  made in the prescribed form, or (ii) is incomplete, or (iii)  is not accompanied with the payment of requisite fee, or  (iv) the licensing authority is of the opinion that it is  necessary or expedient so to do in the public interest.  The Licensing Authority is also enjoined to take into  consideration the directions of the State Government  issued from time to time. The provision also keeps in view  principles of natural justice and expressly states that no  application for grant of licence can be rejected without  giving the applicant reasonable opportunity of being  heard. Sub-clause (5) of Clause 3 confers a right of  appeal on the aggrieved applicant and makes the  decision of the State Government on such appeal final. 15.             A reference may also be made to a substantive  Act, namely, the U.P. Sugarcane (Regulation of Supply  and Purchase) Act, 1953. As stated in the Preamble, the  Act has been enacted with a view \023to regulate the supply  and purchase of sugarcane required for use in sugar  factories and gur, rab or khandsari  manufacturing  units\024. Section 2 of the said Act, inter alia, defines  \021assigned area\022, \021cane\022, \021crushing season\022, \021factory\022, \021gur,  rab or khandsari sugar manufacturing unit\022, \021reserved  area\022, etc. Whereas Chapter II of the Act relates to  \021Administrative Machinery\022, Chapter III deals with \021Supply  and Purchase of Cane\022. Section 12 in Chapter III requires  the occupier of any factory to furnish in the manner  prescribed, an estimate of the quantity of cane which will  be required by the factory during such crushing seasons  as may be specified in the order. The Cane Commissioner  would examine every estimate and publish the same with  such modifications as he may make. Section 13 requires  the occupier of a factory to maintain in the prescribed  form, a register of all such cane-growers and cane- growers\022 co-operative Society or Societies and shall sell  cane to that factory. The State Government has been  granted power of survey under Section 14. Section 15 is  an important provision which deals with declaration of  \021reserved area\022 and \021assigned area\022 and may be quoted in  extenso. 15. Declaration of reserved area and  assigned area.\027(1) Without prejudice to any  order made under Clause (d) of sub-section (2)  of Section 16 of the Cane Commissioner may,  after consulting the Factory and Cane-growers\022  Co-operative Society in the manner to be  prescribed:

(a)     reserve any area (hereinafter called the

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reserved area); and

(b)     assign any area (hereinafter called an  assigned area),  

for the purpose of the supply of cane to a  factory in accordance with the provisions of  Section 16 during one or more crushing  seasons as may be specified and may likewise  at any time cancel such order or alter the  boundaries of an area so reserved or assigned.

       (2) Where an area has been declared as  reserved area for a factory, the occupier of  such factory shall, if so directed by the Cane  Commissioner, purchase all the cane grown in  that area, which is offered for sale to the  factory.

       (3) Where any area has been declared as  assigned area for a factory, the occupier of  such factory shall purchase such quantity of  cane grown in that area and offered for sale to  the factory as may be determined by the Cane  Commissioner.

       (4) An appeal shall lie to the State  Government against the order of the Cane  Commissioner passed under sub-section (1).

16.             Section 16 regulates purchase and supply of  cane in the reserved and assigned areas. It is equally  important and may be reproduced: 16. Regulation of purchase and supply of  cane in the reserved and assigned areas.\027 (1) The State Government may, for maintaining  supplies, by order, regulate\027

(a)     the distribution, sale or purchase of any  cane in any reserved or assigned area; and

(b)     purchase of cane in any area other than a  reserved or assigned area.

(2)     Without prejudice to the generality of the  foregoing powers such order may provide for\027

(a)     the quantity of cane to be supplied by each  Cane-grower or Cane-growers\022 Co-operative  Society in such area to the factory for  which the area has so been reserved or  assigned;

(b)     the manner in which cane grown in the  reserved area or the assigned area, shall  be purchased by the factory for which the  area has been so reserved or assigned and  the circumstance in which the cane grown  by a cane-grower shall not be purchased  except through a Cane-growers\022 Co- operative Society;

(c)     the form and the terms and conditions of  the agreement to be executed by the  occupier or manager of the factory for

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which an area is reserved or assigned for  the purchase of cane offered for sale;

(d)     the circumstances under which permission  may be granted\027

   (i)         for the purchase of cane grown in  reserved or assigned area by a Gur,  Rab or Khandsari Manufacturing Unit  or any person or factory other than the  factory for which area has been  reserved or assigned, and

   (ii)        for the sale of cane grown in a reserved  or assigned area to a Gur, Rab or  Khandsari Manufacturing Unit or any  person or factory, other than the  factory for which the area is reserved  or assigned;

(e)     such incidental and consequential matters  as may appear to be necessary or desirable  for this purpose.       17.             Section 28 authorizes the State Government to  make rules. 18.             There is still another statute, known as the  U.P. Sugarcane (Purchase Tax) Act, 1961. Section 4  thereof provides for grant of licence for manufacturing  \021gur\022 or \021rab\022. Sub-section (1) of the said section states  that no unit other than a unit comprising vertical  crusher (urdhwa kolhu) or vertical power crusher  (urdhwa shakti chalet kolhu) for manufacture of  production of gur or rab by crushing sugarcane or a unit  which has obtained a licence under the Uttar Pradesh  Khandsari Sugar Manufacturers Licensing Order, 1967,  shall, without obtaining a licence from the Sugar  Commissioner, carry on or undertake any process  connected with the manufacture or production of gur or  rab. Sub-section (3) of the said section reads as under: (3)     An application for grant or renewal of a  licence shall be disposed of by the Sugar  Commissioner expeditiously and shall not be  rejected except where an application has not  been made by the prescribed date, or in the  prescribed form, or is incomplete in any  respect or is not accompanied by proof of  payment of the requisite fee including late fee,  if any, or the Sugar Commissioner is of opinion  that it is necessary or expedient so to do in   public interest with a view\027

(i)     in the case of an application for grant of a  licence\027

     (a)       to regulating the manufacture of gur or  rab by units; or

     (b)       to avoiding uneconomic concentration  or units in any area; or

     (c)       to ensuring, in reserved areas,  adequate supplies of sugarcane to a  factory;

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(ii)   in the case of an application for renewal of  a licence, to regulating the manufacture of  gur or rab by units;

       Provided that while disposing of the  applications for grant or renewal of licence, the  Sugar Commissioner may also take into  consideration\027

(a)     the conduct of the applicant in working the  unit, if any, prior to the date of application  including previous conviction, if any, for  the contravention of the provisions of the  Act, the rules made thereunder and the  conditions of the licence;

(b)     the default, if any, made by the applicant  in payment of the dues under this Act; and

(c)     the total continuous period for which the  applicant held a licence under this Act  prior to the date of application;

       Provided further that no application for  renewal of a licence shall be rejected unless  the applicant has been given a reasonable  opportunity of being heard;

       Provided also that where an application  for grant or renewal of a licence is not disposed  by the commencement of the assessment year  or\027

(i)     in the case of an application for grant of a  licence, within three months; and

(ii)    in the case of an application for renewal of  a licence, within two months,

of the date on which the application is made,  whichever is later, the licence shall be deemed  to have been granted or renewed, as the case  may be.

19.             Section 5 provides for renewal of licence.  Section 6 lays down conditions for suspension or  cancellation of a licence. Sections 7 to 14 deal with the  powers of Authorities under the Act.       CONSIDERATION OF MERITS 20.             The High Court considered the scheme of  substantive laws occupying the field and also  subordinate legislation, dealing with the policy relating to  supply of sugarcane to the factories and stated;      The U.P. Sugarcane (Regulation of Supply  and Purchase) Act, 1953 provides a  mechanism for reasonable, necessary,  sufficient and continuous supply of sugarcane  to the sugar factories in the crushing season,  keeping in mind the interest of the sugarcane  growers, cane grower\022s cooperative societies,  sugar factories and also inter-se interest of the  sugar factories.  The supply of sugarcane to  the sugar factories in the quantity which may  be reasonably required by them for production

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in a particular season or seasons is to be  regulated by the provisions of this Act.  A duty  has been cast upon the Sugarcane  Commissioner under Sections 11, 12 & 15 of  the U.P. Act 1953 to require the occupier of  each factory to furnish in the manner and by  the date specified in an order issued by the  Sugarcane Commissioner, an estimate of the  quantity of sugarcane which would be required  by a factory during such crushing season or  seasons as may be specified in the order.  The  Sugarcane Commissioner, therefore, has to  issue an order by which he would make the  occupier of every factory to furnish the  estimated quantity of sugarcane as per  requirement of the sugar factory for a  particular crushing season or seasons, which  should be done in a manner and by the date  specified by the Sugarcane Commissioner.   The Sugarcane Commissioner is obliged to  examine every such estimate and has the  liberty to modify the same and with such  modifications, if any, the publication of the  estimate is done for the purpose of making it  known to all sugar factories that the estimate  prepared by them for the requisite quantity of  sugarcane for a particular crushing season or  seasons has been accepted by the Sugarcane  Commissioner with or without modification. In  case, any sugar factory is not satisfied with the  estimate so modified or otherwise, it may file a  revision before the prescribed authority.  The  State Government is the prescribed authority  under Rule 23-A of U.P. Sugarcane (Regulation  of Supply and Purchase) Rules, 1957.  The  sugar factory may file a revision within  fourteen days from the date of order.  After the  publication of estimates, the survey etc. shall  be made under section 18 of the U.P. Act  1953.  The combined reading of sections 11,  12 and 15 would lead to a conclusion that at  the time of declaration of reserved area and  assigned area under Section 15, the estimate  published under section 12 shall be the basis  for consideration by the Sugarcane  Commissioner for the purpose of quantifying  the requirement of sugarcane for every factory.

21.             The High Court also noted that there may be  occasions when one sugar factory is not able to crush the  entire sugarcane available in assigned or reserved area  and at the same time another sugar factory is having the  shortage of sugarcane in its reserved area during the  crushing season.  In such situations, the Sugarcane  Commissioner can very well assign any specified area out  of the reserved area of the latter factory to the former  factory.  The Court observed that reserved area of a sugar  factory is not of permanent nature and no sugar factory  can claim that the area reserved for a particular year  would remain with it for all the time.  The reserved area  is allocated to a particular sugar factory for a \021crushing  season\022 which can be changed or modified by the  Sugarcane Commissioner in the next crushing season.  If  exigencies of situation require, the Sugarcane  Commissioner can change the area even during the same

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crushing season.

GRANT OF LICENCE TO RESPONDENT NO. 4 22.             The learned counsel for the appellant  contended that the action of respondent Nos. 1 to 3 in  granting licence in favour of respondent No.4 was totally  illegal, improper and unreasonable. It was urged that the  said action was taken only with a view to show favour to  respondent No.4 by changing the policy. The action was  upheld by the High Court on the assumption that there  is no shortage of sugarcane in the State and entire  sugarcane produced in the area is available to the  appellant. The assumption was neither factually correct  nor legally well founded.  The order passed by the High  Court, therefore, deserves to be set aside. 23.             The High Court, in our opinion, was right in  considering the facts and circumstances in their entirety  and in holding that the action of respondent Nos. 1 to 3  could not be said to be illegal or otherwise objectionable.  It is, no doubt, true that earlier an application made by  respondent No.4 came to be rejected but it was because  of the policy then in force. Since the policy was thereafter  changed, grant of licence in favour of respondent No.4  could not be objected by the appellant. 24.             The High Court was also right in referring to  several conditions imposed on respondent No.4 by  respondent-authorities while granting licence. Our  attention has been invited by the learned counsel for the  respondents to orders dated February 16, 2004 and  February 17, 2004. Over and above usual conditions,  certain additional conditions were also imposed. They  were as under: 1.      The cane price to be paid by the unit  shall not be less than Minimum Statutory  Price fixed by the Government of India.

2.      The Cane purchase Tax and cane  development commission on the basis of  actual cane purchased shall be payable  by the Unit.

3.      The Unit shall purchase additional  balance cane other than bonded cane  from the reserved areas of Sugar Mills  of the State. There will be no  permission to purchase bonded cane.

4.      The crushing capacity of the Unit shall be  limited to 1250 TCD.

5.      Prior to 2004-05 crushing season, the  Unit shall take action to produce  additional cane and do development as  per undertaking given in the application.                                  (emphasis supplied) 25.             From the aforesaid conditions, it is abundantly  clear that the authorities have protected interests of all  parties. So far as the appellant is concerned, condition  No.3 expressly states that the unit of respondent No.4  shall purchase additional balance cane other than  bonded cane from the reserved area of the sugar mills of  the State. It further stated that \023there shall be no  permission to purchase bonded cane\024. Cane producers  were also protected by imposing a condition on the  respondent No. 4 that \023the cane price to be paid by the

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Unit shall not be less than Minimum Statutory Price  fixed by the Government of India\024. Probably, taking into  account the aforesaid situation and interest of all  concerned, the crushing capacity of respondent No.4\022s  Unit was made limited to 1250 CTT. The authorities also  considered the overall industrial growth and in condition  No.5 it was stated that \023prior to 2004-05 crushing  season, the Unit shall take action to produce additional  cane and do development as per undertaking given in the  application\024. 26.             In our opinion, the respondents are also right  in submitting that sub-section (3) of Section 4 of 1961  Act as also sub-clause (4) of Clause 3 of the Licensing  Order, 1967 require the Licensing Authority not to reject  application for grant or renewal of licence unless the  conditions laid down therein are satisfied.  The  respondents, therefore, rightly urged that grant of licence  is \021rule\022 and rejection \021exception\022.  If keeping in view the  provisions of law, the power has been exercised by the  Licensing Authority by granting licence in favour of  respondent No. 4, and confirmed by the State  Government and the High Court did not consider the  case to interfere with the exercise of power by Statutory  Authorities, no grievance can be made by the appellant  that the High Court Committed an error of law or of  jurisdiction which deserves interference by this Court in  exercise of power under Article 136 of the Constitution.  27.             To us, the High Court is right in holding that  whether or not the sugar factory of the appellant has  been adversely affected is essentially a question of fact.   Such question, therefore, in our considered opinion, can  be raised by the appellant before the Authorities under  the Act, and it cannot be decided in proceedings under  Article 226 or Article 136 of the Constitution.  The  appellant can also in this connection rely on additional  condition No. 3 imposed on respondent No. 4 that no  permission could be granted to the unit of respondent  No. 4 to purchase \021bonded cane\022.       ONE MORE OPTION TO SUGARCANE GROWERS 28.             The learned counsel for the appellant also  contended that the respondent authorities were wrong in  observing that the farmers would have one more option of  getting adequate price for their crop. According to the  appellant, it was totally irrelevant and extraneous  consideration and could not have been taken into  account for granting relief in favour of respondent No.4.  The High Court, by approving the said order, has also  committed similar illegality as committed by the  authorities and on that ground also, the impugned order  deserves to be set aside. 29.             We are unable to uphold the contention. As  already indicated, the action of the respondent  authorities was in consonance with law. Neither statutory  provisions were violated nor policy guidelines were  infringed. By adhering to provisions of substantive laws  as also delegated legislation, if the Authorities had taken  into consideration that the farmers would have one more  option to get their crops sold at an appropriate price, it  cannot successfully be contended that such  consideration was irrelevant, extraneous or otherwise  unreasonable. On the contrary, in our opinion, one of the  considerations which must be kept in mind by the  Authorities while exercising powers under various  provisions of law would be as to whether exercise of such

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power would also protect interest of sugarcane growers.  In the case on hand, that is precisely done by the  respondent-authorities and we see no infirmity therein.

PUBLIC INTEREST 30.             The learned counsel for the appellant,  however, submitted that an application for grant of  licence can also be rejected if the Sugar Commissioner is  of the opinion that it is necessary or expedient so to do in  public interest with a view\027(i) to regulating the  manufacture of gur or rab by units; or (ii) to avoiding  uneconomic concentration of units in any area; or (iii) to  ensuring, in reserved areas, adequate supplies of  sugarcane to a factory. 31.             But as observed by the High Court, by Office  Order, dated November 15, 2003, the policy was changed  and the State Government was empowered to relax  limitation in clause (a) of para 1 which prohibited  granting of licence to new units in the reserved area or  pocket village of sugar mill.  It expressly states that \023in  case any Sugar Mill decides not to run in a particular  year or in the estimation of Cane and Sugar  Commissioner, the proposed Unit can be run after  meeting the requirement of Sugar Mill and the Owner of  the unit assures to pay Statutory Minimum Price notified  by the Government of India then on the recommendation  of Cane & Sugar Commissioner, the State Government  may consider relaxation in the aforesaid limitation.\024 32.             It is not in dispute that the proposed site of the  new unit of respondent No. 4 falls in the reserved area of  the Sugar Mill of the appellant.  But both the Sugar  Commissioner as well as the Government were satisfied  that the new Unit will not affect adequate supply of  sugarcane to Appellant\022s Sugar Mill and on such  satisfaction, the power of relaxation under clause (a) was  exercised.  Moreover, a specific condition was imposed on  the respondent No. 4 that it would not purchase bonded  cane of the Sugar Mills of the State.  The High Court,  taking note of all these safeguards upheld the order of  the authorities and we see no illegality therein. 33.             It was also submitted by the learned counsel  for the appellant that though the new policy empowers  the Authorities to grant new licence within the radius of  fifteen kilometers of existing sugar factory in relaxation of  the general policy, the Authority is bound to consider the  provisions of Section 4 of 1961 Act, and particularly,  Clause (i) of sub-section (3) thereof.  It was strenuously  contended that neither the Sugarcane Commissioner  considered the factors which were required to be kept in  mind nor the Government was mindful of those factors  and on that ground also, the impugned order is liable to  be quashed.  It was further urged that  adequacy of  supply of sugarcane to the existing factory has to be  considered with reference to the availability of sugarcane  in the area reserved for such factory and not with  reference to the availability of the sugarcane in the whole  State. 34.             We are not impressed by the argument of the  learned counsel.  As is clear from the order passed by the  Sugarcane Commissioner and by the State Government,  the Unit of respondent No. 4 is not given any specific  reserved area earmarked for any specific sugar factory  and it can purchase sugarcane from reserved/assigned  area of any sugar factory in the State.  But even  otherwise, we are of the view that in view of additional

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condition No. 3 imposed on respondent No. 4, the  appellant is not adversely affected by grant of licence in  favour of respondent No. 4.  The said condition, as noted  earlier, allows the Unit to purchase \021other than bonded  cane\022.  If it is so, no prejudice can be said to have been  caused to the appellant. STATUTORY FINALITY 35.             It may also be stated that the order passed by  the Sugar Commissioner is subject to appeal before the  State Government and the State Government has also  confirmed the said order in exercise of appellate  jurisdiction on September 25, 2004. The Appellate  Authority, again considered the entire controversy and  held that the action taken by Sugarcane Commissioner  was not illegal or improper and did not call for any  interference. The Appellate Authority also did not accede  to the prayer of respondent No.4 to increase the capacity  from 1250 to 1500 CTT. 36.             As already adverted to earlier, the order passed  by the State Government in appeal is \021final\022. Thus,  statutory finality is attached to the order passed by the  State Government. It cannot be gainsaid that such  \021statutory finality\022 does not oust the jurisdiction of a High  Court under Article 226/227 of the Constitution nor of  this Court under Article 32/136 of the Constitution. But  it is well settled that while exercising extraordinary  power, a High Court or this Court will be conscious and  mindful of such provisions and will not substitute its  decision for the decision taken by the Authority which is  \021final\022 under the relevant law. In our opinion, the learned  counsel for the respondents are right in submitting that  the Original Authority as well as Appellate Authority  considered the facts and circumstances and exercised  the power by granting licence to respondent No.4 and if  the High Court did not think it proper to interfere with  such order, it cannot be said that by doing so, the High  Court has failed to exercise jurisdiction or exceeded its  power in dismissing the petition.

PROVIDING SUGARCANE ONLY TO SUGAR MILLS

37.             It was then argued that the statutory scheme  governing sugar and sugarcane requires preference to be  given to sugar mills and their requirements have to be  satisfied before sugarcane is diverted to rab/khandsari  units or power crushers.  In this connection, strong  reliance was placed on a decision of this Court in Shri  Ganesh Sugar Works v. State of Haryana, (1987) 4 SCC  604.  In that case, dealing with Haryana Khandsari  Sugar Manufacturers\022 Licensing Order, 1972 and scarcity  of production of sugarcane, this Court held that refusal  to grant or renew licences to khandsari units located  within areas reserved for sugar mills having regard to  bad seasonal conditions resulting in face of production  could not be held illegal or improper.  It was in general  public interest. 38.           The Court also made the following observations;              We may mention that while the  Commissioner is now the Licensing  Authority, the State Government is the  appellate authority. It is a matter of common  knowledge that the Sugarcane Control Order  was made in the interests of growers of  sugarcane primarily and also in the interests  of the sugar factories, that is, factories

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engaged in the manufacture of sugar by the  vacuum pan process and in the ultimate  analysis in the interests of the consumers by  making sugarcane available for sugar  production. Apart from the fact that the  sugar produced by the vacuum pan process  is better suited for domestic consumption, it  is undisputed that in the case of vacuum pan  sugar factories, the recovery of sugar from  cane ranges between 9.5% to 11.5% while the  recovery in the case of Khandasari Units is  hardly 5 to 6%. There can be no question that  viewed from the viewpoint of production of  sugar, it is advantageous to divert as much  sugarcane as possible to sugarcane factories  instead of Khandasari Units Even so  Khandasari Units flourish, as is generally  known because of the byproduct of molasses.  As experience showed that Khandasari units  are better able to tap the growers of  sugarcane, it became necessary for the  Government to reserve areas for sugar mills.  Otherwise, sugar mills would have to remain  idle for long periods unable to withstand the  competition of khandasari units in reaching  sugarcane growers. It was for that purpose,  that is, with a view to prevent sugar factories  from remaining idle by making available to  them sufficient quantities of sugarcane that  the idea of reserving areas for sugar factories  was conceived. In the years when there is no  dearth of sugarcane and it is available in  plenty, there is no problem and khandasari  units will be free to purchase as much as  sugarcane as they want in reserved areas  also if the units are located there. But  problems arise when on account of bad  seasonal conditions there is a fall in the  production of sugarcane in some years. In  such years, restrictions have to be imposed  on the purchase of sugarcane by khandasari  units in areas reserved for sugar factories  and when the seasonal conditions are indeed  very bad, it may even become necessary for  the Government to altogether ban the  purchase of sugarcane by khandasari units  in areas reserved for sugar factories. This  may be done by the refusal to grant or renew  licences to khandasari units operating in  reserved areas in those years. That is  precisely what has happened in the present  case. It is because of extremely bad seasonal  conditions that the Cane Commissioner was  forced to refuse to renew the licenses of the  appellants on the ground of inadequate of  sugarcane for sugar factories. According to  the figures mentioned by Cane  Commissioner, the production of sugarcane  had fallen from 52.50 lakh tonnes in 1983-84  to 46.20 lakh tonnes in 1984-85 and 41.38  lakh tonnes in 1985-86. We also have it that  in the previous crushing season one of the  sugar factories, namely, the Panipat Co- operative Sugar Mills only crush 10.80 lakh  quintals of sugarcane as against the allotted

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quantity of 25 lakh quintals due to lack of  availability of sugarcane. In fact, on  September 14 1984, the Government of India  had already addressed a communication to  the Secretaries to the Governments of all  sugar producing States requiring them to  take certain measures to avoid diversion of  sugarcane from sugar mills. It was stated in  the letter that in the year 1983-84, sugar  production had declined sharply from 82.32  lakh tonnes to 59 lakh tonnes. Among the  measures suggested was "not to grant fresh  licences to khandasari units in the reserved  areas of sugar factories and to the extent  possible even to encourage by all possible  means the existing khandasari units in the  reserved areas to shift out". We do not,  therefore, have any doubt that having regard  to the fall in the production of sugarcane and  the fall in the production of sugar, the  banning of supply of sugarcane to  khandasari units by the method of refusing  to licence khandasari units operating in  reserved areas was in the public interest.

39.             The High Court, in our opinion, was right in  observing that Ganesh Sugar Works was decided in the  light of fact-situation before the Court.  In our view, the  learned counsel for the respondents are right in  submitting that even in that case, this Court has  indicated that the Government ought to take into  consideration interest of sugarcane growers also. In the  present case, the Sugarcane Commissioner has precisely  performed that function when he observed that the  sugarcane growers had one more option available for  realizing proper return.  Apart from the fact that it  cannot be said to be an irrelevant consideration, the  Authorities are enjoined to keep in view this aspect as  one of the considerations and we see no infirmity therein. 40.             It is also pertinent to note that when licence  was granted to respondent No. 4 by the Sugarcane  Commissioner for one Power Crusher of a capacity of  1250 TCD, the appellant as also respondent No. 4  challenged that order.  The grievance of the appellant was  that no such licence could have been granted by the  Sugarcane Commissioner in favour of respondent No. 4.   The complaint made by respondent No. 4, on the other  hand, was that the Licensing Authority ought to have  granted licence for 1500 TCD as applied. 41.             The State Government disposed of both the  matters by upholding the order passed by the Sugarcane  Commissioner observing that the action taken by the  Licensing Authority could not be said to be illegal or  improper.  It also considered the fact that farmers in the  area had to face problems as Kashipur Unit was declared  as \021sick unit\022 and it adversely affected cane area. 42.             The Appellate Authority, therefore, stated;         After deeply considering of records  available in the file and arguments of  Appellant and M/s DSM Sugar, I am in the  opinion that the license granted to M/s IGL,  Kashipur in village Sandkheda, District  Udham Singh Nagar for one Power Driven  Kolhu size 71x42cm, 15 Rollers hydraulic  capacity 1250 TCD Open Pan Steam Boiling

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System for season 2003-04 under Cane  Purchase Tax Act, 1961 and the Licensing  Rules under the said Act by Cane and Sugar  Commissioner, Uttranchal is in accordance  with the Act and Rules and there is no need  to amend the order dated 17/2/2004 passed  by the Cane and Sugar Commissioner,  Uttranchal in view of his estimation of cane  availability.

43.             The Authority also took into consideration the  interest of the appellant herein and protected the Factory  by making the following observations;         As far as, the argument of M/s DSM  Sugar that the estimation of cane availability  by Cane and Sugar Commissioner, Uttranchal  is wrong, it is duty of Cane and Sugar  Commissioner to ensure availability of  sugarcane to Sugar Mill as from its  requirement under section 15 of UP Sugarcane  (Regulation of Supply and Purchase) Act,  1953.  The Cane and Sugar Commissioner,  Uttranchal shall ensure that other conditions  being same M/s DSM Sugar should get cane in  proportion to its crushing capacity.  The Cane  Commissioner can reserve or divert cane from  the area of one Sugar Mill to other Sugar Mill  on the basis of cane availability.

44.             We are of the view that in the light of the above  considerations and findings, no interference with the  order was called for and the High Court was right in  confirming the orders passed by the Authorities. 45.             Learned counsel for the appellant urged that  Clause 3 of the Gur (Regulation of Use) Order, 1968 bars  use of gur for any purpose other than as specified in sub- clauses (a) to (c).  It was, therefore, submitted that the  grant of licence by respondent Nos. 1 to 3 to respondent  No. 4 for preparation of alcoholic liquor is in violation of  the provision of law.  The learned counsel for the  respondent No. 4, however, submitted that the same  clause (Clause 3) confers power on the Central  Government or any officer authorized by it to permit the  use of gur inter alia for the use in chemical industry or  for any other industrial use. 46.             The High Court considered the contention and  observed that the application submitted by respondent  No. 4 was limited to manufacture of rab and no use was  indicated at all.  From the counter-affidavit filed in the  High Court, no such indication was exhibited.  But in  any case, if there was violation of provision of law relating  to use of rab for a purpose other than permitted by law,  the remedy was not to challenge licence but to question  the use of rab.  An appropriate direction in such an  eventuality can always be issued by the Authority.

POLICY MATTERS AND JUDICIAL REVIEW 47.             The learned counsel for the appellant  contended that though as per policy of the Government  for the year 2002-03, licence could not have been granted  and in fact it was not granted to respondent No. 4, the  policy was changed by the Government to favour  respondent No. 4 and licence was granted under the  altered policy which was illegal and unlawful and  malicious.  Regarding mala fide exercise of power, we will

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consider at an appropriate stage, but let us consider the  general principles relating to policy matters, right of  Government to formulate, follow or change such policy as  also the power of judicial review by writ-courts over such  matters. 48.             In our judgment, it is well-settled that public  authorities must have liberty and freedom in framing  policies. No doubt, the discretion is not absolute,  unqualified, unfettered or uncanalised and judiciary has  control over all executive actions. At the same time,  however, it is well-established that courts are ill- equipped to deal with these matters. In complex social,  economic and commercial mattes, decisions have to be  taken by governmental authorities keeping in view  several factors, and it is not possible for courts to  consider competing claims and conflicting interests and  to conclude which way the balance tilts. There are no  objective, justiciable or manageable standards to judge  the issues nor such questions can be decided on \021a  priori\022 considerations. 49.             As observed by Justice Holmes in Metropolis  Theatre Company v. State of Chicago, 57 L Ed 730, in  such matters, the courts must grant certain measure of  \023play in the joints\024 to the executive. 50.             In the leading case of Bennett Coleman v. Union  of India, (1972) 2 SCC 788 : AIR 1973 SC 106,  constitutional validity of the Import Policy for the  newsprint adopted by the Government was challenged in  this Court. The Court refused to adjudicate the policy  matters unless it was shown to be arbitrary, capricious  or mala fide. Speaking for the Court, Mathew, J.  observed:      \023The argument of the petitioners that  Government should have accorded greater  priority to the import of newsprint to supply  the need of all newspaper proprietors to the  maximum extent is a matter relating to the  policy of import and this Court cannot be  propelled into the unchartered ocean of  Governmental policy\024.                                           (emphasis supplied) 51.             Similarly, in State of Maharashtra v. Lok  Shiksha Sanstha, (1971) 2 SCC 410 : AIR 1973 SC 588,  the applications made by the petitioners for opening new  schools were rejected by the authorities. The said action  was challenged by the petitioners by filing writ petitions  in the High Court on various grounds. The High Court  allowed the petitions and directed the authorities to grant  permission to the petitioners to start schools.   52.            Reversing the judgment, this Court observed  that the High Court has thoroughly misunderstood the  nature of the jurisdiction that was exercised by it. \023So  long as there is no violation of any fundamental rights  and if the principles of natural justice are not offended, it  was not for the High Court to lay down the policy that  should be adopted by the educational authorities in the  matter of granting permission for starting schools. The  question of policy is essentially for the State and such  policy will depend upon an overall assessment and  summary of the requirements of residents of a particular  locality and other categories of persons for whom it is  essential to provide facilities for education. If the overall  assessment is arrived at after a proper classification  on a reasonable basis, it is not for the courts to  interfere with the policy leading up to such

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assessment.\024                                  (emphasis supplied) 53.             In R.K. Garg v. Union of India, (1981) 4 SCC  675 : AIR 1981 SC 2138 : (1982) 1 SCR 947,  constitutional validity of the Special Bearer Bonds  (Immunities and Exemptions) Act, 1981 was challenged  being arbitrary and having no reasonable nexus with the  object sought to be achieved. Holding the Act intra vires  and constitutional and describing it as a policy  legislation, the majority stated:      \023The court must always remember that  \021legislation is directed to practical problems,  that the economic mechanism is highly  sensitive and complex, that many problems are  singular and contingent, that laws are not  abstract propositions and do not relate to  abstract units and are not to be measured by  abstract symmetry\022, \021that exact wisdom and  nice adaption of remedy are not always  possible\022 and that \021judgment is largely a  prophecy based on meager and uninterrupted  experience\022. Every legislation particularly in  economic matters is essentially empiric and it  is based on experimentation or what one may  call trial and error method and therefore it  cannot provide for all possible situations or  anticipate all possible abuses. There, may be  crudities and inequities in complicated  experimental economic legislation but on  that account alone it cannot be struck  down as invalid.\024                                          (emphasis supplied)

54.             In Liberty Oil Mills v. Union of India, (1984) 3  SCC 465, dealing with the import and export policy  followed by the Government, this Court observed:      \023The import policy of any country,  particularly a developing country, has  necessarily to be tuned to its general economic  policy founded upon its constitutional goals,  the requirements of its internal and  international trade, its agricultural and  industrial development plans, its monetary  and financial strategies and last but not the  least the international political and diplomatic  overtones depending on ’friendship, neutrality  or hostility with other countries’.  There must  also be a considerable number of other factors  which go into the making of an import policy.  Expertise in public and political, national and  international economy is necessary before one  may engage in the making or in the criticism of  an import policy. Obviously courts do not  possess the expertise and are consequently  incompetent to pass judgment on the  appropriateness or the adequacy of a  particular, import policy.                                         (emphasis supplied)

55.             Again, in State of M.P. v. Nandlal, (1986) 4 SCC  566 : AIR 1987 SC 25 : JT 1986 SC 701, a licence to run  liquor shop granted in favour of A was challenged as  arbitrary and unreasonable. This Court held that there  was no fundamental right in a citizen to carry on trade or  business in liquor. However, the State was bound to act  in accordance with law and not according to its sweet will

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or in an arbitrary manner and it could not escape the  riguor of Article 14. Therefore, the contention that Article  14 would have no application in a case where the licence  to manufacture or sell liquor was to be granted by the  State Government was negatived by this Court.   56.            The Court, however, observed: \023But, while considering the applicability of  Article 14 in such a case, we must bear in  mind that, having regard to the nature of the  trade or business, the Court would be slow to  interfere with the policy laid down by the State  Government for grant of licences for  manufacture and sale of liquor. The Court  would, in view of the inherently pernicious  nature of the commodity allow a large measure  of latitude to the State Government in  determining its policy of regulating,  manufacture and trade in liquor. Moreover,  the grant of licences for manufacture and  sale of liquor would essentially be a matter  of economic policy where the court would  hesitate to intervene and strike down what  the State Government has done, unless it  appears to be plainly arbitrary, irrational  or mala fide\024.              (emphasis supplied)

57.             Referring to the decision of the Supreme Court  of the United States in Metropolis Theatre Company, the  Court observed:      \023We must not forget that in complex  economic matters every decision is necessarily  empiric and it is based on experimentation or  what one may call ’trial and error method’ and,  therefore, its validity cannot be tested on any  rigid \021a priori’ considerations or on the  application of any straight-jacket formula. The  court must while adjudging the constitutional  validity of an executive decision relating to  economic matters grant a certain measure of  freedom or play in the ’joints’ to the executive\005  Mere errors of Government are not subject to  our judicial review. It is only its palpably  arbitrary exercises which can be declared void\005  The Court cannot strike down a policy  decision taken by the State Government  merely because it feels that another policy  decision would have been fairer or wiser or  more scientific or logical. The Court can  interfere only if the policy decision is  patently arbitrary, discriminatory or mala  fide\024.                                  (emphasis supplied) 58.             In Shri Sitaram Sugar Co. Ltd. v. Union of India,  (1990) 3 SCC 223 : AIR 1990 SC 1277 : JT 1990 (1) SC  462, prices of levy sugar were fixed by the Government by  grouping sugar factories on the basis of geographical  location. The said action was challenged by certain sugar  companies as arbitrary, unreasonable and ultra vires.  Dismissing the petitions and holding it to be a policy  decisions of the Central Government, this Court  observed:      \023What 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

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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\024.                                                    (emphasis supplied)

59.             In Ugar Sugar Works Ltd. v. Delhi  Administration, (2001) 3 SCC 635 : AIR 2001 SC 1447 :  JT 2001 (4) SC 31, dealing with the executive policy  regulating trade in liquor in Delhi, this Court stated that  it was well settled that the courts, in exercise of power of  judicial review do not ordinarily interfere with the policy  decisions unless such policy could be faulted on the  grounds of mala fide, unreasonableness, arbitrariness,  unfairness, etc. But the mere fact that it would hurt  business interests of a party would not justify  invalidating the policy. In tax and economic regulation  cases, there are good reasons for judicial restraint,  if not judicial deference, to judgment of the  executive. The Courts are not expected to express  their opinion as to whether at a particular point of  time or in a particular situation any such policy  should have been adopted or not. It is best left to the  discretion of the State.  (emphasis supplied) [See also  SIEL Ltd. v. Union of India & Ors., (1998) 7 SCC 26 : AIR  1998 SC 3076]. 60.             In BALCO Employees\022 Union v. Union of India,  (2002) 2 SCC 333 : AIR 2002 SC 350 : JT 2001 (10 SC  466, a decision of the Government of India of transferring  its majority shares in favour of M/s Bharat Aluminium  Company Ltd. was challenged by the employees as illegal,  unlawful and ultra vires Articles 14 and 16 of the  Constitution. Negativing the contention and upholding  the decision of the Government, after referring to several  cases on the point, this Court stated:      \023Process of disinvestment is a policy  decision involving complex economic factors.  The Courts have consistently refrained from  interfering with economic decisions as it has  been recognised that economic expediencies  lack adjudicative disposition and unless the  economic decision, based on economic  expediencies, is demonstrated to be so violative  of constitutional or legal limits on power or so  abhorrent to reason, that the Courts would  decline to interfere. In matters relating to  economic issues, the Government has,  while taking a decision, right to "trial and  error" as long as both trial and error are  bona fide and within limits of authority\024.                                         (emphasis supplied) 61.             The State and its instrumentality has also  power to change policy. The executive power is not  limited to frame a particular policy. It has untrammeled  power to change, rechange, adjust and readjust the  policy taking into account the relevant and germane  considerations. It is entirely in the discretion of the  Government how a policy should be shaped. It should  not, however, be arbitrary, capricious or unreasonable.   62.            In Sangwan v. Union of India, 1980 Supp SCC  559 : AIR 1981 SC 1545, this Court observed that \023a  policy once formulated is not good forever, it is perfectly  within the competence of the Union of India to change it,  re-change it, adjust it and readjust it according to the

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compulsions of circumstances and imperatives of  national considerations\024. 63.             In Union of India v. S.L. Dutta, (1991) 1 SCC  505 : AIR 1991 SC 363 : JT 1990 (4) SC 741, the old  policy of promotion was changed and new policy was  adopted. The High Court interfered with the decision  taken by the authorities observing that \023the new  promotion policy was not framed after an in-depth study\024  and directed the Government to consider the case of the  petitioner on the basis of the old policy.   64.            Setting aside the said order and upholding the  policy, this Court observed:      \023These are matters regarding which  judges and the lawyers of courts can hardly be  expected to have much knowledge by reason of  their training and experience\024. 65.             In our opinion, Chief Justice Chagla was right  in making the following observations in State of Bombay  v. Laxmidas Ranchhoddas, AIR 1952 Bom 468;      \023We are not oblivious of the fact that in  order that the modern State should function  the Government must be armed with very large  powers. But the High Court does not interfere  with the exercise of those powers, The High  Court only interferes when it finds that those  powers are not exercised in accordance with  the mandate of the Legislature. Therefore, far  from interfering with the good governance of  the State, the Court helps the good governance  by constantly reminding Government and its  officers that they should act within the four  corners of the statute and not contravene any  of the conditions laid down as a limitation  upon, their undoubtedly wide powers.  Therefore, even from a practical point of  view, even from the point of view of the  good governance of the State, we think  that the High Court should not be reluctant  to issue its prerogative writ whenever it  finds that the sovereign Legislature has  not been obeyed and powers have been  assumed which the Legislature never  conferred upon the executive\024.                                         (emphasis supplied)

MALA FIDE EXERCISE OF POWER 66.             The appellant also contended that the  impugned action of granting licence to respondent No. 4  by respondent Nos. 1 to 3 is mala fide.  It was submitted  that in spite of acute shortage of sugarcane in the State  of Uttranchal, the policy was changed by the Government  in order to grant benefit to respondent No. 4, not only at  the cost of interest of the appellant but also by ignoring  larger public interest and industrial growth and  development.  In this connection, the attention of the  Court was also invited to a letter, dated August 04, 2003  written by the cane & Sugar Commissioner to the  Secretary, Cane Development & Sugar Industry,  Uttranchal wherein he had stated that there was no  necessity to make any change in the Licensing Policy for  2003-04.  The counsel submitted that surprisingly,  within a short span of about two months, the same  Commissioner agreed to change in policy by inserting a  proviso to para ka with the sole objective to favour  respondent No. 4.  It was pursuant to modified policy

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that respondent No. 4 got the licence.  Therefore, the  action deserves to be set aside on the ground of mala fide  exercise of power. 67.             Now, it is well-settled and needs no authority  for holding that every power must be exercised bona fide  and in good faith.  Before more than hundred years, Lord  Lindley said in General Assembly of Free Church of  Scotland v. Overtaum, 1904 AC 515 : 20 TLR 370; \023I take  it to be clear that there is a condition implied in this as  well as in other instruments which create power, namely,  that the powers shall be used bona fide for the purpose  for which they are conferred\024.  In other words, every  action of a public authority must be based on utmost  good faith, genuine satisfaction and ought to be  supported by reason and rationale.  It is, therefore, not  only the power but the duty of the Court to ensure that  all authorities exercise their powers properly, lawfully  and in good faith.  If powers are exercised with oblique  motive, bad faith or for extraneous or irrelevant  considerations, there is no exercise of power known to  law and the action cannot be termed as action in  accordance with law. 68.             But as already discussed earlier, a Court of  Law is not expected to propel into \021the unchartered ocean\022  of Government Policies.  Once it is held that the  Government has power to frame and reframe, change and  rechange, adjust and readjust policy, the said action  cannot be declared illegal, arbitrary or ultra vires the  provisions of the Constitution only on the ground that  the earlier policy had been given up, changed or not  adhered to.  It also cannot be attacked on the plea that  the earlier policy was better and suited to the prevailing  situation. 69.             Allegations of mala fide are serious in nature  and they essentially raise a question of fact.  It is,  therefore, necessary for the person making such  allegations to supply full particulars in the petition.  If  sufficient averments and requisite materials are not on  record, the court would not make \021fishing\022 or roving  inquiry.  Mere assertion, vague averment or bald  statement is not enough to hold the action to be mala  fide.  It must be demonstrated by facts.  Moreover, the  burden of proving mala fide is on the person levelling  such allegations and the burden is \021very heavy\022 [vide E.P.  Royappa v. State of Tamil Nadu, (1974) 4 SCC 4 : (1974) 2  SCR 348].  The charge of mala fide is more easily made  than made out.  As stated by Krishna Iyer, J. in Gulam  Mustafa v. State of Maharashtra, (1976) 1 SCC 800 : AIR  1977 SC 448], it is the last refuge of a losing litigant [see  also Ajit Kumar v. Indian Oil Corporation, (2005) 7 SCC  764].  In the case on hand, except alleging that the policy  was altered by the Government, to extend the benefit to  respondent No. 4, no material whatsoever has been  placed on record by the appellant.  We are, therefore,  unable to uphold the contention of the learned counsel  that the impugned action is mala fide or malicious. 70.             The High Court, in our opinion, was right in  observing that the change of policy was not limited to the  case of respondent No. 4 but it was uniformly applied to  one and all.  To us, therefore, it cannot be contended that  the High Court committed an error in arriving at the said  conclusion which requires interference under Article 136  of the Constitution.  We, therefore, see no substance in  this argument as well. 71.             Keeping in view statutory provisions, the policy

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decision taken by the respondent-authorities and interest  of all parties including existing sugar factories, a decision  has been taken by the respondent Nos. 1 to 3 granting  licence in favour of respondent No.4. The said decision  was confirmed by the State in exercise of appellate power  and the High Court was not convinced that the decision  was illegal, arbitrary or otherwise unreasonable. We are  unable to persuade ourselves to hold that all the  decisions suffer from any error of law or of jurisdiction  and they should be set aside. We, therefore, express our  inability to grant relief to the appellant. 72.             For the foregoing reasons, we hold that the  decisions taken by the respondent-authorities and  confirmed by the High Court suffer from no illegality or  infirmity. The appeal, therefore, deserves to be dismissed  and is accordingly dismissed, however, without any order  as to costs.