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PETITIONER: STATE OF MAHARASHTRA & ANR.

       Vs.

RESPONDENT: POOJA BREW-CHEM INDUSTRIES P. LTD. & ANR.

DATE OF JUDGMENT15/09/1995

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. HANSARIA B.L. (J)

CITATION:  1996 AIR  219            1995 SCC  Supl.  (4) 179  JT 1995 (7)    39        1995 SCALE  (5)537

ACT:

HEADNOTE:

JUDGMENT:                          O R D E R      Leave granted.      The appeal by special leave arises from the order dated January 31,  1995 of  the Division  Bench of the Bombay High Court. The  High Court  in the impugned order granted relief as under:      "5.  For the reasons aforesaid, the Writ      Petition succeeds  and is  allowed. Rule      is made  absolute  in  terms  of  prayer      clause (a).  The annual alcohol quota of      14.40 lakh  bulk litres  be released  to      the 1st petitioner, on compliance of the      statutory provisions, within two weeks." The prayer in clause (a) read thus:      "This Hon’ble  Court be pleased to issue      a writ  of mandamus  or a  writ  in  the      nature  of   mandamus   or   any   other      appropriate  writ,  order  or  direction      under Article 226 of the Constitution of      India  directing   the  Respondents   to      forthwith issue  to the  1st  petitioner      the requisite  D.S.V. licence under Rule      26 of the Bombay Denatured Spirit Rules,      1959 as  also to forthwith release 14.40      lakh bulk  litres  of  alcohol/specially      denatured spirit  annually  to  the  2nd      petitioner."      In order  to  appreciate  whether  or  not  the  relief granted would  be justified, it is necessary to notice a few relevant facts.      M/s.   Pooja    Brew-chem   Industries   Ltd.,   Bombay [hereinafter referred  to as ‘the appellant’] had applied to the Commissioner,  Prohibition and  Excise for  grant  of  a permit to  manufacture Ethyl  Acetate falling under products covered in  Schedule I  issued by  the Government  of India.

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Referring to the said application, the office of Director of Industries in  its letter  dated July  31, 1990 addressed to the Commissioner,  Prohibition and  Excise, stated  that for that purpose  a licence  from  the  Central  Government  was compulsory and  it was  difficult to  obtain  it  unless  it complied  with   certain  requirements   enumerated  in  the enclosed letter. It was also stated that after taking review of the  progress made  by the  respondent-Company the office was recommending  to  accord  sanction  to  the  respondent- Company to  utilise assured  annual quota of 14.40 lakh bulk litres of  alcohol for producing two products, viz., Deithyl Phthalage and Diethyl Oxalate. On April 4, 1991, a reply was given by the Home Department to the respondent-Company thus:           "Now the  said  unit  is  going  to      manufacture two  products, i.e., Deithyl      Oxalate and Diethyl Phthalate instead of      Ethyl Acetate  and for that purpose, the      alcohol quota  of 14.4.0 lac bulk litres      which is  sanctioned for  manufacture of      Ethyl Acetate  will remain valid and the      Government grants permission to continue      this assurance  itself.  The  period  of      assurance shall  be for one year; and if      the unit  does not  start  manufacturing      the aforesaid products by overcoming all      difficulties during  this period, it may      be considered that assurance for alcohol      quota is cancelled."      Thereafter, the  company had  written a letter on April 1,  1992  to  the  Commissioner  intimating  that  they  had completed their  project to  manufacture the products in the factory located at the stated place and that they were ready to start  the production.  They requested  in the  letter to issue the  licence required  under Rule  26  of  the  Bombay Denataured Spirit  Rules, 1959  [for short, ‘the Rules’]. It appears that  the matter was considered at different stages. It was  asserted  by  the  respondent-Company  in  the  writ petition that  ultimately the  Minister had  recommended the grant of  licence and  also allocation of the required quota of  14.40   lakh  bluk   litres  of   rectified  spirit  for manufacture of the aforesaid two products. Since licence was not being  granted, the  respondent-Company  approached  the High Court which gave the above stated directions.      It  is  contended  by  Shri  Dholakia,  learned  senior counsel appearing  for the  State, that  though at one stage the  Government   had  decided   to  grant   D.S.V  licence, subsequently it  had come  to the  notice of  the Government that  certain   sensitive  materials  were  required  to  be examined.  Accordingly,  they  examined  the  matter  before taking any decision but in the meantime the High Court moved under Article  226  of  the  Constitution,  had  issued  the directions, as  stated earlier. It is contended that on June 21, 1993,  decontrol  of  allocation  and  supply  from  the Government sources  of the  rectified spirit  was  made.  In consequence,  the  Government  had  lost  control  over  the allotment. Thereafter,  an industry was free to approach the appropriate authority  for supply of alcohol for manufacture of any  of their  products  as  a  raw  material  and  that, therefore, the  direction issued by the High Court to supply 14.4.0  lakh   bulk  litres  of  alcohol  in  terms  of  the compromise is  clearly unsustainable.  It is  also contended that so  long as  the licence is not issued under Rule 26 of the Rules  in D.S.V  Form,  the  respondent-Company  is  not entitled even to start manufacturing thereof. Therefore, the High Court  was  clearly  in  error  in  issuing  the  above

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directions.      Shri A.M.  Singhvi, leaned counsel for respondent No.1, contended that  in view  of the  various letters referred to hereinbefore, a  compromise was  made by  the Government for the establishment  of the  factory. On the basis of the said compromise, the respondents had established the factory at a huge expenditure  and that,  therefore, the  appellants were estopped from  going behind  the  compromise  to  grant  the licence. He  agrees that after the decontrol of allotment of alcohol, the  requirement was  that the licensing authority, viz.,  the   Superintendent,  was  to  specify  the  quantum required  by   the  respondent-company  to  manufacture  the specified items. Unless the specification of the requirement was made,  it was  difficult for  the respondent-company  to procure alcohol  in the  open market  and keep  the same  in store  for  manufacture  of  the  products.  The  appellant- authorities were not justified in not granting the same.      Having  regard   to  the  respective  contentions,  the question is  whether the  order passed  by the High Court is sustainable in law. The essential question would, therefore, be whether  the respondent can have a licence under Rule 26. Admittedly, till  date no  licence is issued. It is true, as contended by  Shri Singhvi,  that required  quantum for  the manufacture of  the products  is  to  be  specified  in  the licence, as is evident from similar licences issued to other companies. But  after June  21, 1993,  the Government has no obligation to  make any  allotment of alcohol and supply the same to  any manufacturer  since after  the decontrol, it is free for  all to  purchase alcohol wherever it is available. But, as  stated earlier,  issuance of the licence under Form D.S.V. being  a condition  precedent, the respondent-company could not start manufacturing the aforesaid two items unless licence was  issued  to  it.  The  question,  therefore,  is whether the  Government would  be justified  in not  issuing licence. It  is submitted  that a citizen is entitled to set up  a   factory  and,   as  required  by  certain  statutory provisions,  the   authorities  exercising   the  power  are expected to  issue the  licence subject  to  the  conditions prescribed thereunder.  It is  stated in  paragraph 8 of the rejoinder filed  in this  Court  that  certain  material  as regards  the  desirability  to  grant  the  licence  to  the respondent-company, appears  to have  been  covered  by  the subordinates  of   the  Government.  If  that  is  so,  then necessarily the  concerned authority has to put on notice as to what  material  adverse  to  the  appellants  is  in  its possession and it has to supply necessary copies thereof and also their  prima facie  views on  that material so that the respondent-Company would  have an  opportunity to  place all the  material  to  justify  its  seeking  for  the  licence. Thereafter, it  is open  to  the  appropriate  authority  to consider and  refuse or grant the licence for the reasons to be mentioned  in the order. Since this exercise had not been performed, the High Court was not justified in directing the appellants to  issue the  licence. Accordingly, we set aside the directions  issued by the High Court. Instead, the State is directed  to issue  notice to  the respondent-Company  on grounds on  which they  propose to  take action in case they feel that  it is  not feasible  to issue  the licence to the respondent-Company, together  with  the  material  in  their custody on the basis of which they formed that opinion. This should be done within a period of one month from the date of the receipt  of this  order. On receipt thereof, it would be open to  the respondent-Company  to submits its response and any other  material in  supports of  its claim.  On  receipt thereof, the licensing authority would consider the case and

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pass appropriate  order and  communicate the  same within  a period of  two months therefrom to the respondent-Company by registered post with acknowledgement due.      Our setting  aside the  order of the High Court may not be construed to mean that exercise of the statutory power of the licensing authority is fettered in any way.      Shri Dholakia  brought to our notice that some material appears  to  be  confidential  and,  therefore,  it  is  not advisable in  the expediency  of  public  administration  to disclose the  same by  supplying copies  thereof. If that is so,  the   competent  authority   is  at  liberty  to  allow inspection  of   such  material   by  the  counsel  for  the respondent-Company and  on inspection  thereof, it  would be open to them to submit their response.      The appeal is accordingly allowed. No costs.