M/S. Sri Sarvaraya Sugars ... vs Bank Of India,
2022 Latest Caselaw 9265 AP

          * HON'BLE SRI JUSTICE D.V.S.S. SOMAYAJULU

               + WRIT PETITION No.12343 of 2019
                                    and
                WRIT PETITION No.22804 of 2013
                       % 2nd December, 2022

W.P.No.22804 of 2013

# M/s. Sri Sarvaraya Sugars Limited

                                                              ... Petitioner..
AND
$ The Union of India and three others.
                                                        ... Respondents.

! Counsel for the Petitioner : Mr. Vedula Venkata Ramana

^ Counsel for the 1st&2nd respondents: Deputy Solicitor General

^ Counsel for the 3rd respondent : Government Pleader for Industries and Commerce

^ Counsel for the 4th respondents : Sri K. Harinarayana

< Gist:

> Head Note:

? Cases referred:

1) (2021) 2 SCC 392

2) AIR 1990 SC 1984

3) (1990) 4 SCC 624

4) 2022 SCC OnLine SC 871

5) AIR 1961 SC 1480

6) (1974) 2 SCC 231

HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU

W.P.No.12343 of 2019 and W.P.No.22804 of 2013 COMMON ORDER:

With the consent of all the learned counsel both these

Writ Petitions were taken up for hearing since the issues of fact

and law are common.

2. Sri Vedula Venkata Ramana, learned senior counsel

appearing for the petitioner advanced the arguments in

W.P.No.22804 of 2013, to which a reply was given by the learned

Government Pleader for Industries and Commerce appearing for

the 3rd respondent, the learned Deputy Solicitor General

appearing for the 1st respondent, Sri K. Harinarayana, learned

counsel appearing for the 4th respondent.

3. Learned senior counsel for the petitioner submits that

the prayer in the writ petition is as follows:

"....to issue a Writ of Mandamus or any other appropriate writ declaring that the action of the respondents 1 and 2 in not returning the bank guarantee that was submitted by the petitioner along with the industrial entrepreneur memorandum relating to the proposed establishment of new sugar factory at Mundlamuru Village and Mandal, Prakasham District is arbitrary and illegal and

consequently direct the respondents 1 and 2 to forbear from encashment of the bank guarantee and further direct them to return the said bank guarantee i.e., BG.No.8654IPEBG09007, duly accepting the representation of the petitioner dated 21.03.2012 and the report of the 3rd respondent dated 20.02.2013 and grant such other relief as it deems fit and proper in the circumstances of the case."

4. It is his contention that despite the best efforts made

by the petitioner for establishment of sugar factory they could not

do so because of causes far beyond their control. Learned senior

counsel submits that the petitioner had acquired the land and

established the IEM (Industrial Entrepreneur Memorandum) for

the proposal of establishment of new sugar factory. They also

furnished the bank guarantee for a sum of Rs.1,00,00,000/-

issued by the 4th respondent in favour of the 1st respondent. It is

submitted that despite the best efforts and for causes far beyond

the petitioner's control the factory could not be established.

Learned senior counsel submits that the contention of the

petitioner that the factory could not be established for the reasons

beyond their control is borne out by the letter dated 20.02.2013,

addressed by the Commissioner of Sugar and Cane Commissioner

to the Union of India and also by the counter affidavit filed by the

3rd respondent. Learned senior counsel initially advanced his

arguments by arguing that the word "shall" has to be interpreted

as "may" in Clause 6D of the Sugarcane (Control) (Amendment)

Order, 2006 (in short "the Control Order"). It is his contention

that since rule in question provides an opportunity to the

industry of being heard, the word "shall" in Clause 6D shall have

to be interpreted as "may". He contends that if the word is given

a mandatory meaning the purpose of issuing of notice and a

reasonable opportunity of being heard is defeated. For this he

relies upon C. Bright v District Collector and Others1 and

other judgments. He also relies upon the leading judgments of

the Hon'ble Supreme Court of India in S.N.Mukherjee v Union of

India2 and in State of Bihar and Others v Dr. Sanjay Kumar

Sinha and Others3 in support of his contentions that the

impugned order did not contain adequate reasons and that a

reasonable opportunity was not given. Later, during the course of

the submissions learned senior counsel submits (relying upon the

judgment of the Hon'ble Supreme Court of India reported in

Swami Samarth Sugars and Agro Industries Ltd., v Loknete

(2021) 2 SCC 392

AIR 1990 SC 1984

(1990) 4 SCC 624

Maruttrao Ghule Patil Dnyaneshwar Sahakari Sakhar

karkhana Ltd., and others4) that an the amended Clause 6D is

in place. He points out that in this judgment the Hon'ble

Supreme Court of India held that the Clauses are retrospective in

operation and that Clause 6D has been amended to give a period

of seven years for starting commercial production. It now states

that the performance guarantee shall be returned if the

commercial production is not commenced even after seven years

for the reasons not attributable to the project proponent and the

same is established on merits.

5. Relying upon the amended proviso of Clause 6D

learned senior counsel submits that since the causes for non-

commencement of the unit which established and are also

pleaded / admitted by the respondent No.3, this Court is

competent to pass an appropriate order in this Writ Petition. He

submits that by allowing this Writ Petition the subsequent Writ

Petition No.12343 of 2019 can also be disposed of since the

prayer therein is only to substitute the security instead of bank

guarantee.

2022 SCC OnLine SC 871

6. Learned Government Pleader for Industries appearing

for the 3rd respondent relying upon his counter argued the matter

at length. However, he also points out that the failure to establish

the unit by the writ petitioner is not due to any causes

attributable to the petitioner. He particularly draws the attention

of this Court to paragraphs 11 to 14 of the counter affidavit filed,

wherein the details are set out of the actions taken by the

petitioner and also the general tendency in the sugar industry

and slump it was facing. However, while stating that the causes

are beyond the control of the writ petitioner, learned Government

Pleader submits that the claim of the petitioner for return of the

bank guarantee is the matter which has to be decided by

respondents 1 and 2 only.

7. On behalf of respondent No.4 a counter is filed. The

learned counsel relies upon the same to make his submissions. It

is submitted as the banker furnishing bank guarantee, the bank

is willing to abide by the orders that may be passed by this Court

on the merits of the matter.

8. For the Union of India, learned Deputy Solicitor

General made extensive submissions and according to his

submissions the petitioner has failed to establish the unit within

the stipulated period i.e., 2 years plus 4 years from the date of

filing of IEM. He also points out that no effective steps were taken

to establish the unit and therefore after giving a notice and a

personal hearing on 21.03.2012 the impugned order was passed

on 29.07.2013. He also points out that the impugned order itself

reflects the fact that a personal hearing was given to the

petitioner. Therefore, he submits that this is not a case in which

this Court should interfere and grant an order. He also argues

that Clause 6D is mandatory in nature. Lastly, he submits that

as the rules and natural justice were complied with this Court

should not interfere in this order.

9. In reply to the later arguments of the learned senior

counsel about the amended Clause 6D and the proviso, the

learned counsel submits, without prejudice to any of his earlier

contentions, that if at all this Court is of the opinion that it

should grant any relief, the respondents alone should be allowed

to take a final decision in the matter on the return of the bank

guarantee.

COURT:

10. This Court after considering all the submissions

notices that the primary submission of the learned senior counsel

appearing for the petitioner is supported by the judgment that he

relies upon including Sainik Motors, Jodhpur and others v

State of Rajasthan5 and C. Bright case (1 supra). The

subsidiary rules of statutory interpretation were considered in

this second judgment. As per the rulings the interpretation of

word "shall" as "may" etc., should be determined by carefully

paying regard to the whole scope of the statute. Paragraph 8 of

the said judgment i.e., C. Bright case (1 supra) is as follows:

"8. A well-settled rule of interpretation of the statutes is that the use of the word "shall" in a statute, does not necessarily mean that in every case it is mandatory that unless the words of the statute are literally followed, the proceeding or the outcome of the proceeding, would be invalid. It is not always correct to say that if the word "may" has been used, the statute is only permissive or directory in the sense that non-compliance with those provisions will not render the proceeding invalid [State of U.P. v. Manbodhan Lal Srivastava, AIR 1957 SC 912] and that when a statute uses the word "shall", prima facie, it is mandatory, but the Court may ascertain the real intention of the legislature by carefully attending to the whole scope of the statute [State of U.P. v. Babu Ram Upadhya, AIR 1961 SC 751] . The principle of literal construction of the statute alone in all circumstances without examining the context and scheme of the statute may not serve the purpose of the statute [RBI v. Peerless General Finance & Investment Co. Ltd., (1987) 1 SCC 424]."

AIR 1961 SC 1480

11. In the judgment reported in Union of India v Raman

Iron Foundry6 these principles of statutory, interpretation were

also extended to the instruments like the Order issued under

Section 3 of the Essential Commodities Act. Paragraph No.8 of

this judgment is also relevant in this context.

"8. It is true that the words "any claim for the payment of a sum of money" occurring in the opening part of clause 18 are words of great amplitude, wide enough to cover even a claim for damages, but it is a well settled rule of interpretation applicable alike to instruments as to statutes that the meaning of ordinary words is to be found not so much in strict etymological propriety of language nor even in popular use as in the subject or occasion on which they are used and the object which is intended to be attained. The context and collocation of a particular expression may show that it was not intended to be used in the sense which it ordinarily bears. Language is at best an imperfect medium of expression and a variety of meanings may often lie in a word or expression. The exact colour and shape of the meaning of any word or expression should not be ascertained by reading it in isolation, but it should be read structurally and in its context, for its meaning may vary with its contractual setting. We must, therefore, read the words "any claim for the payment of a sum of money" occurring in the opening part of clause 18 not in isolation but in the context of the whole clause, for the intention of the parties is to be gathered not from one part of the clause or the other but from the clause taken as a whole. It is in

(1974) 2 SCC 231

the light of this principle of interpretation that we must determine whether the words "any claim for the payment of a sum of money" refer only to a claim for a sum due and payable which is admitted or in case of dispute, established in a court of law or by arbitration or they also include a claim for damages which is disputed by the contractor."

12. Against this legal backdrop, if Clause 6D as it stood is

interpreted, it says that the performance guarantee shall be

forfeited after giving the concerned person a reasonable

opportunity of being heard. If the word "shall" in Clause 6D is

interpreted as mandatory, the very purpose of giving reasonable

opportunity will be lost and the officer has only one option - to

forfeit the guarantee. The whole idea of giving an opportunity is

to enable the concerned party a chance of explaining his stand

and for the decision making authority to take note of the said

explanation. If the decision making authority has no discretion

and shall have to forfeit the bank guarantee, the purpose of

furnishing a reasonable opportunity will be lost, if the

interpretation of the Union is accepted. Therefore, this Court is of

the opinion that in the facts and circumstances of this case the

Clause 6D of the order has to be read as "may" instead of "shall".

It is directory and not mandatory.

13. In addition, the Constitution Bench of the Hon'ble

Supreme Court of India in the case reported in S.N.Mukherjee

case (1 Supra) held as follows in paragraph 35 -

"35. The decisions of this Court referred to above indicate that with regard to the requirement to record reasons the approach of this Court is more in line with that of the American courts. An important consideration which has weighed with the court for holding that an administrative authority exercising quasi-judicial functions must record the reasons for its decision, is that such a decision is subject to the appellate jurisdiction of this Court under Article 136 of the Constitution as well as the supervisory jurisdiction of the High Courts under Article 227 of the Constitution and that the reasons, if recorded, would enable this Court or the High Courts to effectively exercise the appellate or supervisory power. But this is not the sole consideration. The other considerations which have also weighed with the Court in taking this view are that the requirement of recording reasons would (i) guarantee consideration by the authority; (ii) introduce clarity in the decisions; and (iii) minimise chances of arbitrariness in decision-making. In this regard a distinction has been drawn between ordinary courts of law and tribunals and authorities exercising judicial functions on the ground that a Judge is trained to look at things objectively uninfluenced by considerations of policy or expediency whereas an executive officer generally looks at things from the standpoint of policy and expediency."

14. Reasons are the lifeblood of any decision. As

mentioned earlier the affected party is to be given a reasonable

opportunity. Opportunity given should be considered by the

authority before passing the order. Consideration is only visible if

reasons are mentioned in the order. In the case on hand if the

impugned order dated 25.07.2013 is seen it is apparent that upto

paragraph 12 there is only a discussion of the issues and facts.

In paragraphs 12 it is stated that it is observed that the petitioner

has not taken any effective steps and in paragraphs 13 and 14

the conclusions and the operative portions are spelt out. It is not

clear how the signatory of this order came to the conclusion that

the petitioner has "not" established the factory within the time

stipulated nor is the basis for the conclusion observed. In

February, 2013 itself the Commissioner of Sugar and Cane

Commissioner addressed a letter to the Deputy Director,

Department of Food and Public Distribution Directorate of Sugar

setting out his comments on the return of the bank guarantee.

The conclusions of this letter in paragraph No.9 make it very clear

that cane development was not possible due to inadequate

irrigation facilities, less potential of ground water, uncertainty of

the proposed irrigation projects, saline nature of the soil etc.

These comments were available with the department but they

were not considered. Even the counter affidavit filed by the 3 rd

respondent makes it very clear that the failure to establish the

unit is not due to causes in the petitioner's control. The counter

affidavit refers to an earlier letter dated 17.01.2013 by the

Assistant Cane Commissioner wherein the causes are mentioned.

Paragraphs 9 of this counter make it very clear that Deputy

Director wanted the comments from the State and these were

furnished. These reasons are not considered in the impugned

order. They are not even mentioned in the impugned order. After

the counter affidavit is filed by the 3rd respondent also nothing to

the contrary has been pointed out by the Union by filing a

rejoinder etc.

15. The proviso to the Rule and the 2016 amendment

permits return of the bank guarantee if the causes are beyond the

control of the petitioner. In paragraph 37 of the judgment of the

Hon'ble Supreme Court of India in Swamy Samarath Sugars

and Agro Industries Ltd., case (4 supra) it is also clearly held

that the amendment is retrospective. In that view of the matter,

this Court has come to the opinion that the causes are beyond

control of the petitioner. This is visible from the counter affidavit

filed by the 3rd respondent and also the letters enclosed by the

writ petitioner with the writ affidavit (which are not controverted

or disputed by the Union of India). This Court has to, therefore,

hold that the petitioner's efforts to establish the factory failed

because of causes beyond their control. Remitting the matter

back to the Union of India for a further decision is not really

mandated in the circumstances of the case. The causes are

documented by responsible officials of the State and were

forwarded to the Ministry at the Centre. They are not disputed.

16. As this dispute has been pending for the last nine

years, this Court is of the opinion that a quietus is to be given

and the petitioner is entitled to a relief as prayed for. The data is

available and the same is documented. Hence, the Writ Petition is

allowed as prayed for.

17. As a consequence of this order, no orders are needed

in the other Writ Petition No.12343 of 2019. Accordingly, the

same is disposed of. No order as to costs.

18. Consequently, the miscellaneous applications pending,

if any, shall also stand closed.

__________________________ D.V.S.S.SOMAYAJULU, J Date:02.12.2022.

Note: LR copy be marked.

Issue CC in 2 days.

B/o Ssv