Holding

The licensing authority’s grant of licence to respondent No. 4, made under the modified policy and subject to protective conditions, was lawful and not mala‑fide, and the High Court’s dismissal of the writ petition was correct.

Summary

Mis. Dhampur Sugar (Kashipur) Ltd., a sugar manufacturer, applied for a licence to set up a power‑crusher unit for manufacturing rah from sugarcane. The application was initially rejected under the existing licensing policy, but after the State Government modified the policy on 15 November 2003, a fresh application by respondent No. 4 (Mis Indian Glycols Ltd.) was granted. The appellant challenged the grant, alleging that the policy change was arbitrary, unreasonable, and mala‑fide, and that the licence would prejudice its sugarcane supply in the reserved area. The High Court dismissed the writ petition, holding that the policy was uniformly applied and the licensing authority had acted within its statutory powers. The Supreme Court affirmed that the grant of licence is a rule, rejection an exception, and that the authorities, having imposed protective conditions, did not violate any statutory provision or policy guideline. It held that the factual question of sugarcane availability is for the licensing authority, not the courts, and that the order enjoys statutory finality. Consequently, the appeal was dismissed.

Issues considered

The validity of the State Government's modification of the licensing policy and its application to respondent No. 4.
Whether the licensing authority's grant of licence to respondent No. 4 was arbitrary, unreasonable, or mala‑fide.
Whether the High Court erred in dismissing the appellant's writ petition under Articles 226/136.
Whether the question of adequacy of sugarcane supply to the appellant's reserved area is a factual issue for the licensing authority.
Whether statutory finality attached to the State Government's order limits judicial review.

Legislation cited

Essential Commodities Act, 1955s. 2(b), s. 3
Industries (Development and Regulation) Act, 1951s. 2
Sugarcane (Control) Order, 1966s. 11, s. 3, s. 4, s. 6, s. 7

Subjects

licensingsugarcaneessential commoditypolicy changemala fidestatutory finalityreserved areaadministrative lawpublic interestjudicial review

Judgment

f

MIS. DHAMPUR SUGAR (KASHIPUR) LTD. A
y v.
STATE OF UTTARANCHAL AND ORS.

SEPTEMBER 21, 2007
B
[C.K. THAKKER AND AL TAMAS KABIR, JJ.]

Administrative Law:
Sugarcane (Control) Order, 1966; Clauses 3, 4, 6, 7and11/Uttar
Pradesh Sugar Cane (Regulation ofSupply and Purchase) Act, 1953;
c
Clauses 3, 4, 6 and 7 and Ss. 12, 14 and 15:
Sugar Policy-Authorities rejecting the application for grant of
Licence filed by respondent No. 4-Manufacturer of rah from
sugarcane-State Government modified the policy relaxing certain D
limitations-Fresh application filed by the respondent was allowed by
the Licensing Authority-Challenged by appellant-manufacturer of
Sugar on ground that the Unit ofrespondent fell in reserved area where
his Sugar mill is located-Dismissed by High Court-On appeal, Held:
Grant ofLicence is 'rule' and rejection 'exception '-Since the policy E
was modified, grant ofLicence to respondent No. 4 by imposing several
conditions by the authority could not be objected by the appellant-
By imposing conditions, Authorities have protected interests of all
parties/Sugar manufacturers-Neither statutory provisions violated
>- • nor Policy guidelines were infringed-Authorities as well as the
Government after satisfying themselves that the new Unit of the
F
respondent would not affect adequate supply ofSugar to appellant's
Sugar mill-Then only exercise power of relaxation and granted
Licence-Authorities granted Licence in terms ofprovisions ofLaw-
The Order was confirmed by the State Government-The Order so
G
confirmed by the State Government is final -Thus, statutory finality
is attached to the Order-Though, such a statutory finality does not
oust the jurisdiction of the High Court /Supreme Court-But by
exercising such power, High Court/Supreme Court would not substitute
its own decision for th~ decision taken by the authorities, which is final
199 H
200 SUPREME COURT REPORTS [2007] 10 S.C.R.

A under the relevant law-Once it is held that the Government has power
to frame and reframe; charge/recharge, such action cannot be declared
illegal, arbitrary or ultra vires the Constitution-Allegations ofmala
fide by appellant raises a question of fact, therefore, should be
supported by material particulars -In the instant case, no such
B material has been placed on record-Hence the contention of mala
fide, as alleged by the appellant, cannot be upheld--High Court was
right in dismissing the petition of the appellant by observing that the
change of Policy was not limited to the case of respondent No.4 in
granting Licence since it was applied uniformly to one and all--Hence,
C on the facts and in the circumstances ofthe case, High Court was right
in not interfering with the order passed by the authorities and as
confirmed by the State Government-Essential Commodities Act,
1955-S.3-Gur (Regulations of Use) Order, 1968; Clause 3.
Constitution of India, 1950; Articles 136 or 226:
D
Grant of Licence to respondent No. 4-manufacturer of rah from
sugarcane-Interest ofapplicant-manufacturer ofsugar-Effect on-
Held: It is a question offact, which could be raised by the appellant
before the authorities-It cannot be decided in proceedings under
Article 136 or Article 226 of the Constitution.
E
Words and Phrases:
'Sugar cane '-Meaning ofin the context ofS 2(b) ofthe Essential
Commodities Act, 1955_
F 'Controlled industries '-Meaning of in the context of the
Industries (Development and Regulation) Act, 1951.
'Factory', Khandsari sugar', Khandsari unit', 'Crusher', 'Power
Crusher', 'Procedure of Khandsari sugar' and 'Reserved area'-
Meaning of in the context of Sugar cane (Control) Order, 1966.
G
'Assigned area '-Meaning ofin the context ofthe Licensing Order, )'
196?

AppcHant-Company is engaged in the manufacture, sale and
supply of sugar. One Mis. Indian Glycols Limited-respondent no. 4
H
M/S.DHAMPURSUGAR(KASHIPUR)LTD.v. STATEOF 201
UTTARANCHAL
submitted an application for grant of licence for Power Driven A
y
Crusher to start a new Unit for the manufacture of rah from
sugarcane. The application was rejected by the authorities. The
State Governmentvide its order dated Novem her 15, 2003 modified
its earlier sugar policy empowering the Government to relax the
limitation laid down in para (ka) of the Government Order in certain B
cases. Respondent No. 4 submitted a fresh application for grant of
licence for rah manufacturing unit, which was allowed by the
Licencing Authority observing that the new unit of respondent No.
4 would not adversely affect adequate and sufficient supplies of
sugarcane to the sugar mills of the appellant in the reserved area C
and hence, limitation in para (ka) could be relaxed to grant the
Licence to respondent No. 4. Appellant challenged the order of the
Licencing authority by filing a writ petition in the High Court, which
was dismissed by the High Court inter alia holding that all the
contentions raised by the appellant were ill-founded. Hence the ID
present appeal.
Appellant contended that the change in licencing policy effected
by the Authorities was arbitrary, unreasonable and contrary to law;
that no licence could have been granted to respondent No. 4- and
the said action of the authorities was ma la fide and had been taken E
by then in colourable exercise of power with a view to extend
undeserving benefit to respondent No.4; 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; that moreover, under 1961 Act, the Authorities were F
obliged to consider as to whether relaxation of conditions were
necessary and expedient in 'public interest'. Since, there is no such
satisfaction which is reflected in the order, there is total non-
applicatiou of mind on the part of the authorities and the order is
liable to be quashed; and that the authorities considered availability G
of sugarcane in the 'whole State' as against availability of sugarcane
in the' reserved area'. What was relevant was not availability of
sugarcane in the State, but availability in the reserved 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 H
202 SUPREME COURT REPORTS [2007] 10 S.C.R.

A sugarcane, it was not made available and the appellant had to close
down certain units due to non-availability of sugarcane. ~

Respondent-State submitted that in accordance with the
changed policy of the State Government, respondent No. 4 applied
for licence, which was granted and there is no illegality therein; that
B all actions were taken by the Authorities after considering the
relevant laws applicable to the case on hand and a decision was taken;
that in the order issued in favour of respondent No. 4, it was
expressly stated that the unit ofrespondent No. 4 will not purchase
'bonded cane'; that there would be no possibility of adverse effect
c of cane supply to the sugar mill of the appellant; that so far as
availability of sugarcane to appellant-Company is concerned, it is
ensured that there is no violation of any provision oflaw on the basis
of which appellant can object grant of licence in its favour; that a
condition has been imposed that respondent No. 4 has to cater its
D 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; that
correct reading of relevant provisions of1961 Act clearly indicate
that normally licence should be granted unless a finding is recorded
E 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;·
and that if by taking into consideration all the facts and circumstances
in their entirety, the relevant provisions oflaw and change of policy,
F
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.
Dismissing the appeal, the Court
G HELD: 1.l. 'Sugarcane' is an essential commodity as defined
in Section 2(b) of the Essential Commodities Act, 1955. r
[Para 10] [215-E)
Ch. Tika Ramji & Ors. etc. v. State of Uttar Pradesh & Ors.,
H [1956] 1SCR393: AIR (1956) SC 676 and A.K. Jain v. Union of
~-
MIS. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF 203
UTIARANCHAL
India & Ors., [1970) 1SCR673: AIR (1970) SC 267, relied on. A
1.2. 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 'sugar' industry B
as one of the controlled industries. [Para 11] [215-H; 216-A-B]
Mis. Triveni Engineering Works Ltd. & Anr. v. Union ofIndia &
Ors., AIR (1996) All 420, referred to.
2.1. No manufacturer, without obtaining from the licensing C
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. [Para 13) [219-D)
2.2. An application for the grant of licence by the licensing D
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 f~e, 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 E
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 F
makes the decision of the State Government on such appeal final.
[Para 14) [220-A-B-C]
3.1. The High Court was right in considering the facts and
circumstances in their entirety and in holding that the action of G
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 H
204 SUPREME COURT REPORTS [2007] 10 S.C.R.

A the appellant. (Para 23] [226-E-F]
3.2. From the conditions, so imposed by the authorities in
granting Licence to respondent No. 4, 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
B 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 "there shall be no permission to purchase
bonded cane". Cane producers were also protected by imposing a
condition on the respondent No. 4 that "the cane price to be paid by
c the Unit shall not be less than Minimum Statutory Price fixed by the
Government oflndia". Probably, taking into account the aforesaid
situation and interest of all concerned, the crushing capacity of •
respondent No.4's Unit was made limited to 1250 CTT. The
authorities also considered the overall industrial growth and in
D condition No. 5 it was stated that "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".
[Para 25] (227-C-D-E-F]
3.3. The respondents are also right in submitting that sub-
E section (3) of Section 4 ofU.P. Sugar cane (Purchase Tax) Act, 1961
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
F licence is 'rule' and rejection 'exception'. 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
G Authorities, no grievance can be made by the appellant that the High
Court Committed an error oflaw or of jurisdiction which deserves
interference by this Court in exercise of power under Article 136 of
the Constitution. [Para 26] [226-A-B; 227-G-H]
3.4. The High Court is right in holding that whether or not the
H sugar factory of the appellant has been adversely affected is
~
MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 205
UTTARANCHAL
essentially a question of fact. Such question can be raised by the A
y
appellant before the Authorities under the Act, and it cannot be
decided in proceedings under Article 226 or Article 136 of the
Constitution. [Para 27] [228-B-C-D]
3.5. Neither statutory provisions were violated nor policy
guidelines were infringed. By adhering to provisions of substantive B
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, one of the considerations c
which must be kept in mind by the Authorities while exercising poweni
under various provisions oflaw would be as to whether exercise of
such power would also protect interest of sugarcane growers. In the
case on hand, that is precisely done by the respondent-authorities
and no infirmity is found therein. [Para 29] [228-F-G-H; 229-A] D
4.1. It is not in dispute that the proposed site of the new unit o,f
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 adequat~
supply of sugarcane to Appellant's Sugar Mill and on such E
satisfaction, the power ofrelaxation under clause (a) of Para-1 was
exercised. Moreover, a specific condition was imposed on the
respondent No. 4 that it would not purchase bonded cane of the Sugar
..
:1-
Mills of the State. The High Court, taking note of all these
safeguards upheld the order of the authorities and no illegality is F
found therein. [Para 32] [229-F-G]
I

4.2. It is clear from the order passed by the Sugarcane
Commissioner and by the State Government that the Unit bf
respondent No. 4 is not given any specific reserved area earmark~d
for any specific sugar factory and it can purchase sugarcane from G
-f reserved/assigned area of any sugar factory in the State. But even
otherwise, in view of additional condition No. 3 imposed ~n
respondent No. 4, the appellant is not adversely affected by grant
oflicence in favour of respondent No. 4. The said condition allows
the Unit to purchase 'other than bonded cane'. lfit is so, no prejudice H
~-
206 SUPREME COURT REPORTS [2007] 10 S.C.R.

A can be said to have been caused to the appellant.
[Para 34] [230-D-E)
5. The order passed by the State Government in appeal is
'fmal'. Thus, statutory finality is attached to the order passed by the
State Government. It cannot be gainsaid that such 'statutory fmality'
B 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
C taken by the Authority which is 'final' under the relevant law. The
respondents are right in submitting that the Original Authority as
well as Appellate Authority considered the facts and circumstances
iand 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,
D it cannot be said that by doing so, the High Court has failed to
exercise jurisdiction or exceeded its power in dismissing the petition.
[Para 36) [230-H; 231-A-B-C]
6.1. The High Court was right in observing that this Court
decided the case of Ganesh Sugar Works v. State ofHaryana in the
E light of fact-situation before the Court. 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
F 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 no infirmity is
found therein. [Para 39) [233.;E-F-GJ
G
Shri Ganesh Sugar Works v. State o/Haryana, [1987) 4 SCC 604,
referred to.

6.2. It is also pertinent to note that when licence was granted
to respondent No. 4 by the Sugarcane Commissioner for one Power
H Crusher of a capacity of 1250 TCD, the appellant as also respondent
MIS. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF 207
UTTARANCHAL
No. 4 challenged that order. The grievance of the appe!lantwas that A
no such licence could have been granted by the Sugarcane
Commissioner in favour ofrespondent 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.
The State Government disposed of both the matters by upholding .B
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. In the light of the considerations and findings by the
authorities and appellate authorities, no interference with the order was
called for and the High Court was right in confirming the orders passed C
by the Authorities. [Paras 40, 41and44] [233-H; 234-B; 235-B]

6.3. The High Court considered the contention of the appellant
that 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). Therefore, grant of licence by respondent Nos. 1 to 3 to D
respondent No. 4 for preparation of alcoholic liquor is in violation
of the provision oflaw and observed that the application submitted.
by respondent No. 4 was limited to manufacture of rah 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 E
was violation of provision oflaw relating to use of rah for a purpose
other than permitted by law, the remedy was not to challenge licence
but to question the use ofrab. An appropriate direction in such an
eventuality can always be issued by the Authority.
[Paras 45 and 46] [235~B-C-D-E] F
7.1. It is well-settled that public authorities must have libertr
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 G
matters. In complex social, economic and commercial matt~s,
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 w,ay
the balance tilts. There are no objective, justiciable or manageable H
208 SUPREME COURT REPORTS [2007] 10 S.C.K

A standards to judge the issues nor s~ch questions can be decided on
-¥\
'a priori' consid~rations. (Para 48] (236-A-B-C]
Bennett Coleman v. Union of India, (1972] 2 SCC 788: AIR
(1973) SC 106; State ofMaharashtra v. Lok Shiksha Sanstha, [1971]
2 SCC 410: AIR(1973); R.K. Gargv. Union ofIndia, [1981] 4 SCC
B 675 : AIR (1981) SC 2138 : (1982] 1 SCR 947; Liberty Oil Mills v.
Union ofIndia,_ (1984] 3 SCC 465; State ofMP. v. Nandlal, (1986] 4
SCC 566: AIR (1987) SC 25: JT (1986) SC 701; Shri Sitaram Sugar
Co. Ltd v. Union ofIndia, (1990] 3 SCC 223 : AIR (1990) SC 1277
: JT (1990) 1SC462; Ugar Sugar Works Ltd. v. Delhi Administration,
c (2001] 3 sec 635: AIR (2001) SC 1447: JT (2001) 4 SC 31, BALCO
Employees' Union v. Union ofIndia, (2002] 2 SCC 333 : AIR (2002)
SC 350 : JT (2001) 10 SC 466; Sangwanv. Union ofIndia, (1980] Supp
SCC 559 : AIR (1981) SC 1545 and Union ofIndia v. S.L. Dutta, (1991]
1SCC505: AIR (1991) SC 363: JT (1990) 4 SC 741, referred to.
D - State of Bombay v. Laxmidas Ranchhoddas, AIR (1952) Born
468, approved.
Metropolis Theatre Companyv. State ofChicago, 57 L Ed. 730,
referred to.
' E 8.1. It is well-settled and needs no authority for holding that
every power must be exercised bona fide and in good faith. 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
F 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. [Para 67] (243-B-C-D]
G
General Assembly of Free Church of Scotland v. Overtaum,
(1904) AC 515 : 20 TLR 370, referred to.
8.2. Once it is held that the Government has power to frame
and reframe, change and rechange, adjust and readjust policy, the
H said action cannot be declared illegal, arbitrary or ultra vires the
MIS. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF 209
UTTARANCHAL
provisions of the Constitution only on the ground that the earlier A
y 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. [Para 68) [243-E-F] !
•~ >

9.1. Allegations of ma/a fide are serious in nature and they
essentially raise a question of fact. It is, therefore, necessary for B
the person making such allegations to supply full particulan in the
petition. If sufficient averments and requisite materials are not on
record, the court would not make 'fishing' or roving inquiry. Mere
assertion, vague averment or bald statement is not enough to hold
the action to be ma/a fide. It must be demonstrated by facts. c
Moreover, the burden of proving malafide is on the person levelling.
such allegations and the. burden is 'very heavy'.
[Para 69) [243-G-H]
E.P. Royappa v. State of Tamil Nadu, [1974] 4 SCC 4: [1974] 2
SCR 348; Gulam Mustafa v. State ofMaharashtra, [1976] 1 SCC 800 D
: AIR (1977) SC 448 and Ajit Kumar v. Indian Oil Corporation, (2005)
7 sec 764, referred to.
9.2. In the case on hand, except alleging that the policy was
altered by the Government, to extend the benefit to respondent No~ E
4, no material whatsoever has been placed on record by the
appellant. Therefore, the contention of the appellant that the
impugned action is malafide or malicious cannot be upheld.

•
t-
[Para 69] [244-B-C]
9.3. The High Court was right in observing that the change of F
policy was not limited to the case of respondent No. 4 but it was
uniformly applied to one and all. Therefore, it cannot be contend~d
that the High Court committed an error in arriving at the sa,d
conclusion which requires interference under Article 136 of the
Constitution. [Para 70) [244-C-D) G
9.4. Keeping in view statutory provisions, the policy decisihn
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 ofrespondent No.4.
H
210 SUPREME COURT REPORTS [2007] 10 S.C.R. --\
A The said decision wm 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. In such circumstances,
it cannot be held that all the decisions suffer from any error oflaw
or of jurisdiction and they should be set aside. [Para 71] [244-E-F]
B CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4425 of
2007.
-From the Judgment and Order dated 23.12.2005 of the High Court
ofUttaranchal at Nainital in Writ Petition No. 564 of2004(M/B). '-1

C Sudhir Chandra, Nikhil Nayyar, Dayan Krishnan, Gautam Narayan,
Bhagwathi Prasad and Ankit Singal for the Appellant.
Rakesh Dwivedi and Dinesh Dwivedi, Abhishek Chaudhary,
Niranjana Singh, Gaurav Bhatia and D. Bharathi for the Respondents.
D The Judgment of the Court was delivered by
C.K. THAKKER, J. 1. Leave granted.
2. The present appeal is filed by the ap~llant-original petitioner
against the judgment and final order dated December 23, 2005 passed
E by the High Court of Uttranchal at Nainital in Writ Petition No. 564 of
2004 (MIB) by which the Division Bench of the High Court dismissed
the petition filed by the vvrit-petitioner.
3. The appellant-writ-petitioner filed a petition in the High Court of
('
F 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 ofUttranchal, also quashing an order issuing
licence for Power Crusher dated February 17, 2004 issued in favour of
G respondent No. 4; as also quashing an order dated January 22, 2004
issued by Secretary (Ganna Cheeni), Government ofUttranchal. A Writ
of Mandamus was also sought by the appeIIant 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
H .
M/S.DHAMPURSUGAR(KASHIPUR)LTD.v. STATEOF 211
UTTARANCHAL [THAKKER, J.]
made to quash and set aside the order dated September 25, 2004 passed A
y 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 B
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 Mis Indian Glycols Limited ("IGL" for short) submitted c
an application in the year 2003 for grant of licence for Power Driven
Crusher for the manufacture of rah from sugarcane. The application was,'
however, rejected by the Sugarcane Commissioner. According to the
appellant, the Sugarcane Com.'llissioner took the said decision as per the
Licencing Policy of the Government whereunder a new licence to D
Khandsari Unit could not be granted in the reserved area afthe existing
sugar mills. Since the application ofIGL was in the reserved area of the
_.i..
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
E
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 rah from
•
~-
sugarcane juice. The said application was allowed by the Licencing
Authority, i.e. Sugarcane Commissioner by an order dated February 17,
F
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 JG~.
The Sugarcane Commissioner as well as the State Government observed
that the new unit would not adversely affect adequate and sufficient G
-~ 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 ma/a fide since the respondents
H
212 SUPREME COURT REPORTS [2007] 10 S.C.R.

A 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
B 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 o~li,cence in favour of Respondent No. 4 uIGL. The Court observed
c that it ~~-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,
D grant oflicence was the rule and rejection an exception. As tlie 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,
E 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
F 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
G 7. The learned counsel for the appellant contended that the change
in licencing policy effected by the Authorities was arbitraJ.y, unreasonable
and contrary to law. It was submitted that no licence could have been
granted to respondent.No. 4- IGL and the said action was malafide
and had been taken by the authorities in colourable exercise of power
H with a view to extend undeserving benefit to IGL. It was also submitted
- r
M/S.DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 213
UTTARANCHAL [THAKKER, J .]
that the High Court was wholly in error in dismissing the petition filed by A
y
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 B
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
'y ensured. Looking to the figures supplied by the appellant, it was clearly
proved that establishment of new unit of respondent No. 4 would c
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 D
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 'public interest'. Since,
there is no such satisfaction which is reflected in the order, there is total
E
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 'whole State' as
_;
against availability of sugarcane in the "area". What was relevant was
·- not availability of sugarC;ane in the State, but availability in the respective F
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 G
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 oflicence granted in favour
H
_,._.--
_

214 SUPREME COURT REPORTS [2007] 10 S.C.R.

A of respondent No. 4-IGL.
.-"(
8. The learned counsel for the respondents supported the order
passed by the Authorities-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
B 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
C 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 ma/a 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
D 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-IGL, it was expressly stated that the unit (respondent
No. 4) will not purchase 'bonded cane'. It was also stated that there
would be no possibility of adverse effect of cane supply to the sugar mill
E 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 \.-.
F been made out to interfere with the said order. The appeal, therefore,
deserves to be dismissed.
9. The learned counsel for respondent No. 4--IGL 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
G 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 oflaw on the basis
of which appellant can object grant of licence in favour of respondent No.
H
M/S.DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF 215
UTTARANCHAL [THAKKER, J.]
4. IGL has not been given or allowed any specific area. On the contrary, A
Y 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 B
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 C
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 D
no interference by this Court in exercise of discretionary and equitable
jurisdiction under Article 136 of the Constitution.
STATUTORY SCHEME GOVERNING SUGAR AND
SUGARCANE
E
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. 'Sugarcane' 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. State of Uttar . F
Pradesh & Ors., [1956] 1 SCR 393 : AIR (1956) SC 676, this Court
held that the Essential Commodities Act included within the definition of
'essential commodity 'food-crops' which would include sugarcane. Again,
in A.K. Jain v. Union ofIndia & 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 'essential G
commodity' 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 H
216 SUPREME COURT REPORTS [2007] 10 S.C.R.

A 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 'sugar' industry as one of the
controlled industries. In Mis Triveni Engineering Works Ltd & Anr. v.
Union ofIndia & Ors., AIR [1996] All 420, the High Court of Allahabad
B 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
c 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
D 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
E the Sugarcane (Control) Order, 1966. Clause 2 thereof defines important
terms such as 'factory, 'khandsari sugar, 'khandsari unit', 'crusher',
'power crusher', 'producer of khandsari sugar', 'reserved area', etc.
Whereas Clause 3 enables the Central Government to fix 'minimum price
of sugarcane payable by producer of sugar, Clause 4 provides for
F 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. -(1) The Central Government may, by order notified
G in the official Gazette.-
(a) reserve any area where sugarcane is grown (hereinafter in this
clause referred to as 'reserved area') 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
H
M/S.DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF 217
UTTARANCHAL [THAKKER, J.]
of sugar, with a view to enabling the factory to purchase the A
quantity of sugarcane required by it;
(b) detennine the quantity of sugarcane which a factory will require
for crushing during any year;
(c) fix, with respect to any specified sugarcane grower or l3
sugarcane gr?wers 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
c
supply to the factory concerned;
(d) direct a sugarcane grower or a sugarcane growers' 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 D
under paragraph (c);
(e) direct that no gur Gaggery) 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; E
(f) prohibit or restrict or othetwise regulate the export of sugarcane
a
from any area (including reserved area) except under and in
/1 accordance with a pennit issued in this behalf.
)..

(2) Every sugarcane grower, sugarcane growers co-operative F
society and factory, to whom or to which an order made under
Paragraph (c) of sub-clause ( l) 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 G
growers' 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
H
218 SUPREME COURT REPORTS . [2007] 10 S.C.R.

A growers, 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.
B 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 jllice shall be purchased for crushing or for manufacture of gur,
C 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 behal£ Clauses 8, 9 and
9A empower the Central Government to issue directions to producers of
D khandsari sugar, power crushers, khandsari units, crushers and co-
operatiye 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 cm.sher or a khandsari.unit or an agent of such an
E 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,
F 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's
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
G 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 kharidsari 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
H
M/S.DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF 219
UTTARANCHAL [THAKKER,J.]
relevant terms in Clause 2, such as, 'assigned area' to mean 'an area A
assigned to a factory under Section 15 of the Uttar Pradesh Sugarcane
(Regulation of Supply and Purchase) Act, 1953'; 'manufacturer' to mean
'a 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'; 'power crusher' as 'crusher working B
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, rah or khandsari sugar'. Clause
3 provides for grant oflicence. Clause 4 prescribes the period for which
licences are to be issued. Clauses 6 and 7 lay down conditions for q
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 D
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 E
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-
F
(a) Regulating the Khandsari Sugar Manufacturing Industry in
the best interest of the industry; or
(b) avoiding uneconomic concentration ofkhandsari units in any
area; or
(c) ensuring in a reserved or assigned area adequate supplies of
sugarcane to a factory.
Provided that...
14. It is thus clear that an application for the grant of licence by the H
-L-
220 SUPREME COURT REPORTS (2007] 10 S.C.R.

A licensing authority cannot be rejected except where (i) such application
has not been made in the prescribed fonn, 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
B 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
C 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 "to regulate
the supply and purchase of sugarcane required for use in sugar factories
D and gur, rab or khandsari manufacturing units". Section 2 of the said
Act, inter alia, defines 'assigned area', 'cane', 'crushing season',
'factory', 'gur, rah or khandsari sugar manufacturing unit', 'reserved area',
etc. Whereas Chapter II of the Act relates to 'Administrative Machinery',
Chapter III deals with 'Supply and Purchase of Cane'. Section 12 in
E 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 ~ ......

p occupier of a factory to maintain in·the prescribed fonn, a register of all
such cane-growers and cane-growers' 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 'reserved area' and 'assigned area' and
G may be quoted in extenso.
15. Declaration of reserved area and assigned area.-(l)
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' Co-operative Society
H
~ ~
MIS. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF 2211
UTTARANCHAL [THAl(KER, J.]
in the manner to be prescribed: A
v
(a) reserve any area (hereinafter called the 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 B
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 c
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 D
of cane grown in that area and offered for sale to the factory as
~_i_-
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 (I).
E
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 ofpurchase and supply ofcane in the reserved
').
and assigned areas.-(1) The State Government may,
F
for
maintaining supplies, by order, regulate-
(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. G
-{
(2) Without prejudice to the generality of the foregoing powers such
order may provide for-
(a) the quantity of cane to be supplied by each Cane-grower or
H
-1-
222 SUPREME COURT REPORTS [2007] 10 S.C.R.

A Cane-growers' 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
B · in which the cane grown by a cane-grower shall not be
purchased except through a Cane-growers' 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 which
c
an area is reserved or assigned for the purchase of cane
offered for sale;
(d) the circumstances under which permission may be granted-
(i) for the purchase of cane grown in reserved or assigned area
D 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
E
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. . ...
~

F
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 oflicence
for manufacturing 'gur' or 'rah'. Sub-section (I) of the said ~ection states
G 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 rah 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
H
MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 223
UTTARANCHAL [THAKKER, J.]

y Commissioner, carry on or undertake any process connected with the A
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 B
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- c
(i) in the case of an application for grant of a licence-
(a) to regulating the manufacture of gur or rab by units; or
(b) to avoiding uneconomic concentration or units in any area;
or D

(c) to ensuring, in reserved areas, adequate supplies of
sugarcane to a factory;
(ii) in the case of an application for renewal of a licence, to
regulating the manufacture of gur or rab by units; E

Provided that while disposing of the applications for grant or
renewal of licence, the Sugar Commissioner may also take into
.>' consideration-
>
(a) the conduct of the applicant in working the unit, if any, prior F
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 G
--(
(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
H
_..
224 SUPREME COURT REPORTS [2007] 10 S.C.R.

A 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-
B
(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 licen~e, within -~
two months,
c
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
D 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
E 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
F
crushing season, keeping in mind the interest of the sugarcane
growers, cane grower's 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 in a particular season or seasons
G
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
H
~
MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 225
UTTARANCHAL [THAKKER, J.]
sugarcane which would be required by a factory during such A
'y 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 B
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 c
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
D
prescribed authority. The State Government is the prescribed
authority under Rule 23-A ofU.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 E
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 I

>- requirement of sugarcane for every factory. F

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 G
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 H
226 SUPREME COURT REPORTS [2007] 10 S.C.R.

A time. The reserved area is allocated to a particular sugar factory for a
'crushing season' which can be changed or modified by the Sugarcane "'(
Commissioner in the next crushing season. If exigencies of si~ation
require, the Sugarcane Commissioner can change the area even during
the same crushing season.
B 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
c 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
D 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
E respondent No.4 came to be rejected but it was because of the policy
then in force. Since the policy was thereafter changed, grant oflicence in
favour of respondent No.4 could not be objected by the appellant.
24. ,The High Cotirt was also right in referring to several conditions
' .....
F 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:
G 1. The cane price to be paid by the unit shall not be less than
Minimum Statutory Price fixed by the Government oflndia.
2. The Cane purchase Tax and cane development commission
on the basis of actual cane purchased shall be payable by the

H
i. I
.
MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 227
UTTARANCHAL [THAKKER,J.]
Unit A
y
3. The Unit shall purchase additional balance cane other than
bonded cane from the reserved areas ofSugar Mills of the
State. There will be no permission to purchase bonded
cane.
B
4. The crushing capacity of the Unit shall be limited to 1250 'fCD.
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)
c
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 D
the reserved area of the sugar mills of the State. It further stated that ''there
_,Ac_ shall be no permission to purchase bonded cane". Cane producers were
also protected by imposing a condition on the respondent No. 4 that ''the
cane price to be paid by the Unit shall not be less than Minimum Statutory
Price fixed by the Government of India''. Probably, taking into account E
the aforesaid situation and interest of all concerned, the crushing capacity
of respondent No.4 's Unit was made limited to 1250 CTI. The authorities
also considered the overall industrial growth and in condition No.5 it was
>'
stated that "prior to 2004-05 crushing season, the Unit shall take action
).. to produce additional cane and do development as per undertaking given F
in the application".
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 oflicence unless the conditions laid down G
therein are satisfied. The respondents, therefore, rightly urged that grant
of licence is 'rule' and rejection 'exception'. If keeping in view the
provisions oflaw, the power has been exercised by the Licensing Authority
by granting licence in favour of respondent No. 4, and confirmed by the
H
228 SUPREME COURT REPORTS [2007] 10 S.C.R.

A 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 oflaw or
of jurisdiction which deserves interference by this Court in exercise of
power under Article 136 of the Constitution.
B 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 offact. Such question, therefore, in our considered opinion, can
be raised by the appellant before the Authorities under the Act, and it
cannot be de".ided in proceedings under Article 226 or Article 136 of
C 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
'bonded cane'.

D 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
E 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.
. ...,
F 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 delegatedlegislation,
if the Authorities had taken into consideration that the farmers would have
G one more option to get their crops sold at an appropriate price, it canndt
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 oflaw would be as to
H whether exercise of such power would also protect interest of sugarcane
y
MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 229
UTTARANCHAL [THAKKER, J.]
growers. In the case on hand, that is precisely done by the respondent- A
'v
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 B
Commissioner is of the opinion that it is necessary or expedient so to do
in public interest with a view-(i) to regulating the manufacture of gur or
rah 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. c
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 oflicence to new units in the reserved area or pocket village of
sugar mill. It expressly states that "in case any Sugar Mill decides not to D
run in a particular year or in the estimation of Cane and Sugar
_A
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 E,
relaxation in the aforesaid limitation.''
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
F
were satisfied that the new Unit will not affect adequate supply of
sugarcane to Appellant's 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 G
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
H
230 SUPREME COURT REPORTS [2007] 10 S.C.R.

A 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 4of1961 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
B 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 . _.,.
C 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
D 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
condition No. 3 imposed on respondent No. 4, the appellant is not J..-.
adversely affected by grant of licence in favour of respondent No. 4. The
said condition, as noted earlier, allows the Unit to purchase 'other than
E bonded cane'. 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
F 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
G any interference. The Appellate Authority also did not accede to the prayer
of respondent No. 4 to increase the capacity from 1250 to 1500 CIT.
36. As already adverted to earlier, the order passed by the State
Government in appeal is 'final'. Thus, statutory finality is attached to the
order passed by the State Government. It cannot be gainsaid that such
H
MIS. DHAMPUR SUGAR (KASHIPUR) LTD. v. STATE OF 231
UTTARANCHAL [THAKKER, J.]

y
'statutory finality' does not oust the jurisdiction of a High Court under A
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 'final' under the relevant law. In
our opinion, the learned counsel for the respondents are right in submitting
a
that the Origin.µ 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
c
petition.
PROVIDING SUGARCANE ONLY TO SUGAR MILLS
37. It was then argued that the statutory scheme governing sugar D
and sugarcane requires preference to be given to sugar mills and their
requirements have to be satisfied before sugarcane is diverted to rah/
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
E
Khandsari Sugar Manufacturers' 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.
F
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
Q,.
Order was made in the interests of growers of sugarcane primarily
-(
and also in the interests of the sugar factories, that is, factories
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
H
y
232 SUPREME COURT REPORTS [2007] 10 S.C.R.

A 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
B viewed from the viewpoint of production of sugar, it is
advantageous to divert as much sugarcane as possible to sugarcane
factories instead of K.handasari Units Even so K.handasari Units
flourish, as is generally known because of the byproduct of
'-I
molasses. As experience showed that Khandasari units are better
c 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
D
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
E
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 ,' -·-
....(
F 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
G of extremely bad seasonal conditions that the Cane Commissioner
was forced to refuse to renew the licenses 6f 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-
H
y
M/S.DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF 233
UTTARANCHAL [THAKKER, J.]
84 to 46.20 lakh tonnes in 1984-85 and 41.38 lakh tonnes in A
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
quantity of 25 lakh quintals due to lack of availability of sugarcane.
In fact, on September 14 1984, the Government of India had .B
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. c
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
D
production of sugarcane and the fall in the production of sugar, the
_ 1. 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 E
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 F
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. 0
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
H
y
234 SUPREME COURT REPORTS [2007] 10 S.C.R.

A 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
B 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 'sick unit' and it adversely
affected cane area.
c
42. The Appellate Authority, therefore, stated;
After deeply considering of records available in the file and
arguments of Appellant and Mis DSM Sugar, I am in the opinion
that the license granted to Mis IGL, Kashipur in village Sandkheda,
D District Udham Singh Nagar for one Power Driven Kolhu size
71x42cm, 15 Rollers hydraulic capacity 1250 TCD Open Pan
Steam Boiling Systerµ 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
E 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
F appellant herein and protected the Factory by making the following
observations;
As far as, the argument of Mis 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
G 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 Mis DSM Sugar should
get cane in proportion to its crushing capacity. The Cane
H
,,,.,
M/S.DHAMPURSUGAR(KASHIPUR)LTD.v. STATEOF 235
UTTARANCHAL [THAKKER,J.]
Commissioner can reserve or divert cane from the area of one A
).r
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.
B
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 oflicence by respondent Nos. 1 to 3 to respondent
No. 4 for preparation of alcoholic liquor is in violation of the provision of c
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 D
the application submitted by respondent No. 4 was limited to manufacture
.. .l.
of rah 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, ifthere
was violation of provision of law relating to use of rah for a purpose other
than permitted by law, the remedy was not to challenge licence but to E
question the use of rah. 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 F
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 ma/a fide exercise of power, we will G
consider at an appropriate stage, but let us consider the general principles
relating to policy matters, right of Government to fornmlate, follow or
change such policy as also the power of judicial review by writ-courts
over such matters.
H
236 SUPREME COURT REPORTS [2007] 10 S.C.R.

A 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,
B 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
c can be decided on 'a priori' considerations.
49. As observed by Justice Holmes in Metropolis Theatre Company
v. State ofChicago, 57 L Ed 730, in such matters, the courts must grant
certain measure of ''play in the joints'' to the executive.
D 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 A..
challenged in this Court The Court refused to adjudicate the policy matters
unless it was shown to be arbitrary, capricious or malajide. Speaking
E for the Court, Mathew, J. observed:
"The argument of the petitim1ers 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
F into the unchartered ocean of Governmental policy".

(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
G 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.
H
---('

MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 237
UTTARANCHAL [THAKKER, J.]
52. Reversing the judgment, this Court observed that the High Court A
has thoroughly misunderstood the nature of the jurisdiction that was
exercised by it ''So 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 B
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 c
basis, it is not for the courts to interfere with the policy leading up
to such assessment. " (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 D
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:
"The court must always remember that 'legislation is directed· E
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', 'that exact wisdom and nice adaption of remedy are ,
F
not always possible' and that 'judgment is largely a prophecy based
on meager and uninterrupted experience'. 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 G
-1' inequities in complicated experimental economic legislation but
on that account alone it cannot be struck down as invalid. "

(emphasis supplied)
H
238 SUPREME COURT REPORTS [2007] 10 S.C.R.

A 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:
"The import policy of any country, particularly a developing
country, has necessarily to be tuned to its general economic policy
B
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
c 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
D consequently incompetent to pass judgment on the
appropriateness or the adequacy ofa particular, import policy.
(emphasis supplied)
. 55. Again, in State ofMP. v. Nandlal, [1986] 4 SCC 566 : AIR
E (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 or in an arbitrary manner and
F 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.

G
56. The Court, however, observed:
"But, 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
H manufacture and sale ofliquor. The Court would, in view of the
MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 239
UTTARANCHAL [THAKKER,J.]
inherently pernicious nattrre of the commodity allow a large measure A
·y
of latitude to the State Government in determining its policy of
regulating, manufacture and trade in liquor. Moreover, the grant
oflicences for manufacture and sale ofliquor would essentially
be a matter ofeconomic policy where the court would hesitate
to intervene and strike down what the State Government has B
done, unless it appears to be plainly arbitrary, irrational or
mala fide". (emphasis supplied)
57. Referring to the decision of the Supreme Court of the United
States in Metropolis Theatre Company, the Court observed:
c
"We 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 'a priori' considerations or
on the application of any straight-jacket formula The court must D
while adjudging the constitutional validity of an executive decision
j relating to economic matters grant a certain measure of freedom
or play in the 'joints' to the executive .... Mere errors of
Government are not subject to our judicial review. It is only its
palpably arbitrary exercises which can be declared void .. ' The p
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." (emphasis F
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 oflevy
sugar were fixed by the Government by grouping sugar factories on the
basis of geographical location. The said action was challenged by certain G
-1 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:
"What is best for the sugar industry and in what manner the
H
240 SUPREME COURT REPORTS [2007] 10 S.C.R.

A policy should be fonnulated and iinplemented, bearing in mind the
fundamental object of the statute, viz., supply and equitable
distribution of essential commodity at fair prices in the best interest
of the general public, is a matter for decision exclusively within the
province of the Central Government. Such matters do not
B ordinarily attract the power ofjudicial review".

(emphasis supplied)
59. In Ugar Sugar Works Ltd v. Delhi Administration, [2001] 3
sec 635: AIR (2001) SC 1447: JT (2001) 4 SC 31, dealing with the
C 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 ma/a fide, unreasonableness,
arbitrariness, unfairness, etc. But the mere fact that it would hurt business
D 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
E should have been adopted or not. It is best left to the discretion of
the State. (emphasis supplied) [See also SIEL Ltd v. Union ofIndia
& Ors., [1998] 7 SCC 26 : AIR 1998 SC 3076].

60. In BALCO Employees Union v. Union ofIndia, [2002] 2 SCC
333 : AIR (2002) SC 350 : JT (2001) 10 SC 466, a decision of the
F Government oflndia of transferring its majority shares in favour of Mis
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 µpholding the decision of the Government,
after referring to several cases on the point, this Court stated:
G
"Process 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
H
M/S.DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF241
UTTARANCHAL [THAKKER,J.]
demonstrated to be so violative of constitutional or legal limits on A
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". B

(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 C
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 D
(1981) SC 1545, this Court observed that "a 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
compulsions of circumstances and imperatives of national considerations".
63. In Union of India v. S.L. Dutta, (1991] 1 SCC 505 : AIR E
· (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 ''the new promotion ,
policy was not framed after an in-depth study'' and directed the
Government to consider the case of the petitioner on the basis of the old F
policy.
64. Setting aside the said order and upholding the policy, this Court
observed:
"These are matters regarding which judges and the lawyers of G
courts can hardly be expected to have much knowledge by reason
of their training and experience".
65. In our opinion, Chief Justice Chagla was right in making the
following observations in State ofBombay v. Laxmidas Ranchhoddas,
B
242 SUPREME COURT REPORTS [2007] 10 S.C.R.

A AIR (1952) Born 468;
"We are not oblivious of the fact that in order that the modem
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
B
finds that those powers are not exercised in accordance with the
mandate of the Legislature. 1berefore, 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 comers of the statute and not contravene any
c 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
D sovereign Legislature has not been obeyed and powers have
been assumed which the Legislature never conferred upon the
executive".

(emphasis suppiied)
E 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
F State ofUttranchal, 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
G Commissioner to the Secretary, Cane Development & Sugar Industry,
Uttranchal wherein he had stated that there was no necessity to make
any change in tl1e 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
H ka with the sole objective to favour respondent No. 4. It was pursuant
MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 243
UTTARANCHAL [THAKKER, J.]
to modified policy that respondent No. 4 got the licence. Therefore, the A
action deserves to be set aside on the ground of ma/a fide exercise 0£
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 B
than hundred years, Lord Lindley said in General Assembly of Free
Church o/Scotlandv. Overtaum, (1904) AC 515: 20 TLR 370; "I
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". In other
words, every action of a public authority must be based on utmost good C
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 D
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 'the unchartered ocean' of Government Policies. Once it E
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 F
was better and suited to the prevailing situation.
69. Allegations of ma/a.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 G
make 'fishing' or roving inquiry. Mere assertion, vague averment or bald
statement is not enough to hold the action to be ma/a.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 'very heavy'
[vide E.P. Royappa v. State o/Tamil Nadu, [1974] 4 SCC 4: [1974] H
244 SUPREME COURT REPORTS [2007] 10 S.C.R.

A 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 sec 764]. In the case on hand, except alleging that the policy
B 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.
C 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.
D
71. Keeping in view statutory provisions, the policy 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
E 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
. '
F 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.
G
S.K.S. Appeal dismissed.