The recent legal case focused on the meticulous analysis of Control Order provisions by the court, shedding light on the intricacies of interpreting statutory regulations in the industrial sector. The case delved into the impact of amendments on existing projects, the adherence to timelines, and the forfeiture of performance guarantees. Through this legal lens, the court’s decision aimed to navigate the complexities of project setup and production commencement within the framework of regulatory statutes.
Facts
- Existing sugar factory set up Distillery Plant, Co-generation Plant, Ethanol Plant, and enhanced crushing capacity after a fresh IEM in 2012.
- Plea for de-recognition of IEM on grounds of Sugarcane Control Order norms and delay in commencement of production.
- Challenges regarding establishment and production time frame under Control Order provisions.
- Aerial distance issue and refusal of no-objection certificate by Irrigation Development Corporation.
- Appeal for extension of time and change of location within the same taluka due to zoning restrictions.
- Writ petitions filed by various parties against the proposed sugar factory citing different grounds.
- Amendments to Control Order regarding setting up new sugar factories within a radius of existing ones.
- Government directives related to setting up sugar factories near existing ones.
- Grant of extension and change of location after multiple rounds of submissions and bank guarantees.
- Opposition from the existing sugar factory and challenges to the granted extensions and location change.
- Continuous amendments and extensions granted by the Central Government in response to appeals.
- Issues raised include compliance with Environmental Protection Act, 1986, and adherence to Control Order regulations.
- Concerns regarding the legitimacy of extensions granted by the Central Government against Control Order provisions.
- History and development details of the existing sugar factory from 1974 onwards with capacity expansions.
- The High Court found that the issue involved was the interpretation of Clause 6C of the Control Order.
- The appellant could not take benefit of the investment made on the land purchased and the construction started.
- The new sugar factory had to be at a distance of not less than 25 kms as per the amendment.
- The appellant had not taken any effective steps within the period of two years from the date of acknowledgment of IEM.
- The appellant has not undertaken any construction work at the site till November 2018.
- The IEM stood de-recognized on 08.09.2014 as the four years for commercial production had lapsed.
- The High Court found that the recommendation of the State Government was not on record for the extension of IEM.
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Issue
- Whether the exclusion of period spent in litigation is justified for granting extension of IEM.
- Applicability of the amended Control Order in terms of proviso to Clause 6C as amended by the State of Maharashtra on 03.12.2011.
- Effect of the High Court order when the amended Control Order was in force regarding the Aerial Distance Certificate issue.
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Arguments
- Clause 6C specifies that if steps are not taken within the timeline in the IEM, it stands de-recognized and the performance guarantee is forfeited.
- IEM timeline is fixed from issuance and subsequent amendments in Control Order do not apply to already issued IEM.
- Importance placed on distance between sugarcane availability and crushing capacity for existing and new sugar factories, referring to Ojas Industries case.
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Analysis
- The Control Order has been subject to multiple amendments over time to accommodate unforeseen circumstances and grant extensions.
- The performance guarantee can only be forfeited after giving the concerned person a reasonable opportunity to be heard.
- The appellant’s IEM for setting up a sugar mill was acknowledged in 2010, and no other entrepreneur sought IEM in the area, justifying the extensions granted.
- Litigation challenges against the appellant were deemed unjust in the second round due to lack of jurisdiction and lack of arbitrariness in the decision by the Central Government.
- Amendments to the Control Order were retrospective and dealt with procedural aspects, benefiting entrepreneurs.
- The appellant’s cautious approach in delaying construction due to ongoing litigations was considered reasonable.
- The Court emphasized the importance of considering unforeseen circumstances and competitive benefits to farmers in the context of IEM extensions.
- Unjust writ petitions can’t be used against the appellant, especially when the disputes were found to lack merit.
- The concept of restitution in legal proceedings was highlighted to avoid prejudice to any party due to interim orders.
- The amendments in the Control Order were aimed at facilitating situations where IEM holders faced constraints in proceeding with their projects.
- In cases where delay is due to court cases related to land use, environment, or other reasons, the Ministry of Consumer Affairs may grant extensions not exceeding one year at a time.
- To obtain such extensions, a bank guarantee of Rs. 50 Lakhs for each year of extension must be furnished, in addition to the bank guarantee already submitted under Clause 6B.
- The bank guarantee is subject to forfeiture as per Clause 6D of the Control Order.
- Statute-prescribed procedure must be followed unless indicated otherwise
- Rights of parties in litigation crystallized on commencement of litigation
- Relief decided based on date petitioner entered court
- Application by multiple sugar mills in Uttar Pradesh considered
- Injury caused by court’s act undone, party gains restored
- Gain which party would have earned restored unless interdicted by court order
- Citing Tata Cellular v. Union of India for reference
- The order of the High Court is unsustainable.
- The Rangarajan Committee recommendations are considered.
- The Central Government has granted an extension in time.
- The ultimate beneficiary of these actions would be the farmer, not the sugar factories.
Decision
- The appeals have been allowed
- The writ petitions have been dismissed
- The period spent in the second round of litigation will be excluded for determining the plant setup and commercial production period
Case Title: SWAMI SAMARTH SUGARS AND AGRO INDUSTRIES LTD. Vs. LOKNETE MARUTRAO GHULE PATIL DNYANESHWAR SAHAKARI SAKHAR KARKHANA LTD. (2022 INSC 717)
Case Number: C.A. No.-004021-004021 / 2022
