Karnataka High Court
M/S Sharada Sugars Pvt Ltd vs The State Of Karnataka on 30 October, 2025
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WP No. 2274 of 2023
C/W WP No. 16674 of 2023
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 30TH DAY OF OCTOBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE E.S.INDIRESH
WRIT PETITION NO.2274 OF 2023 (GM-RES)
C/W
WRIT PETITION NO.16674 OF 2023 (GM-RES)
IN WP NO.2274 OF 2023
BETWEEN:
M/S. SHARADA SUGARS PVT. LTD.
HAVING OFFICE AT NO.301
SAPTEGRUHA APARTMENT
2ND FLOOR, 16TH CROSS
SAMPIGE ROAD
MALLESHWARAM
BENGALURU - 560003.
REPRESENTED BY ITS
DIRECTOR & AUTHORISED SIGNATORY
SRI. PARAKASH BELAGALLI
Digitally signed by
ARUNKUMAR M AGED ABOUT 43 YEARS.
S ....PETITIONER
Location: HIGH
COURT OF
KARNATAKA
(BY SRI. K.G. RAGHAVAN, SENIOR ADVOCATE FOR
SRI. SWAROOP SRINIVAS, ADVOCATE)
AND
1. THE STATE OF KARNATAKA
BY DEPARTMENT OF SUGAR
VIDHANA SOUDHA
BENGALURU - 560001
REPRESENTED BY ITS SECRETARY.
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WP No. 2274 of 2023
C/W WP No. 16674 of 2023
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2. THE CHIEF DIRECTOR (SUGAR)
GOVERNMENT OF INDIA
MINISTRY OF CONSUMERS AFFAIRS
FOOD AND PUBLIC DISTRIBUTION
DIRECTORATE OF SUGAR
KRISHI BHAVAN
NEW DELHI - 110 001.
3. THE COMMISSIONER OF CANE
DEVELOPMENT & DIRECTOR OF SUGAR
5TH FLOOR, 'F' BLOCK, CBAB COMPLEX
KHB BUILDING, CAUVERY BHAVAN
K.G. ROAD,
BENGALURU - 560009.
4. M/S. NADAHALLI ETHANOL AND ALLIED INDUSTRIES LTD
HAVING OFFICE AT
DASOHA NILAYA
VIJAYAPURA ROAD
MUDDEVIHAL
VIJAYAPURA - 586 212.
REPRESENTED BY ITS
MANAGING DIRECTOR
SRI. A.S. PATIL.
...RESPONDENTS
(BY SRI. MAHANTESH SHETTAR, AGA FOR R1 AND R3;
SRI. UDAY HOLLA, SENIOR ADVOCATE FOR
SRI. R.B. SADASIVAPPA, ADVOCATE FOR R4;
SRI. ARAVIND KAMATH, ASG A/W
SRI. B.M. KUSHALAPPA, CGC FOR R2)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE
THE ORDER DATED 21.09.2022 IN FILE NO.DSK/LGL/01/2021
PASSED BY REPRESENTED NO.3 AT ANNEXURE-A AS THE SAME
IS ARBITRARY AND WITHOUT AUTHORITY OF LAW; AND ETC.
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WP No. 2274 of 2023
C/W WP No. 16674 of 2023
HC-KAR
IN WP NO.16674 OF 2023
BETWEEN:
M/S. SHARADA SUGARS PVT. LTD.
HAVING OFFICE AT NO.301
SAPTEGRUHA APARTMENT
2ND FLOOR, 16TH CROSS
SAMPIGE ROAD
MALLESHWARAM
BENGALURU - 560003.
REPRESENTED BY ITS
DIRECTOR & AUTHORISED SIGNATORY
SRI. PARAKASH BELAGALLI
AGED ABOUT 43 YEARS.
....PETITIONER
(BY SRI.K.G. RAGHAVAN, SENIOR ADVOCATE FOR
SRI. SWAROOP SRINIVAS, ADVOCATE)
AND
1. UNION OF INDIA
BY DEPARTMENT FOR PROMOTION
OF INDUSTRY AND INTERNAL TRADE
INDUSTRIAL ENTREPRENEURS
MEMORANDUM SECTION
VANIJYA BHAVAN
NEW DELHI - 110 011
REPRESENTED BY ITS SECRETARY.
2. THE STATE OF KARNATAKA
BY DEPARTMENT OF SUGAR
VIDHANA SOUDHA
BENGALURU - 560001
REPRESENTED BY ITS SECRETARY.
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WP No. 2274 of 2023
C/W WP No. 16674 of 2023
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3. THE CHIEF DIRECTOR (SUGAR)
GOVERNMENT OF INDIA
MINISTRY OF CONSUMERS AFFAIRS
FOOD AND PUBLIC DISTRIBUTION
DIRECTORATE OF SUGAR
KRISHI BHAVAN
NEW DELHI - 110 001.
4. THE COMMISSIONER OF CANE
DEVELOPMENT & DIRECTOR OF SUGAR
5TH FLOOR, 'F' BLOCK, CBAB COMPLEX
KHB BUILDING, CAUVERY BHAVAN
K.G. ROAD,
BENGALURU - 560009.
5. M/S. NADAHALLI ETHANOL AND ALLIED INDUSTRIES LTD
HAVING OFFICE AT
DASOHA NILAYA
VIJAYAPURA ROAD
MUDDEVIHAL
VIJAYAPURA - 586 212.
REPRESENTED BY ITS
MANAGING DIRECTOR
SRI. A.S. PATIL.
...RESPONDENTS
(BY SRI. MAHANTESH SHETTAR, AGA FOR R1 AND R3;
SRI. UDAY HOLLA, SENIOR ADVOCATE FOR
SRI. R.B. SADASIVAPPA, ADVOCATE FOR R4;
SRI. ARAVIND KAMATH, ASG A/W
SRI. B.M. KUSHALAPPA, CGC FOR R2)
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND
227 OF THE CONSTITUTION OF INDIA PRAYING TO SET ASIDE
THE DISTANCE CERTIFICATE DATED 09.08.2021 BEARING
No.DSK/MK/HCGP/14/2020-21/283 ISSUED BY RESPONDENT
NO.4 IN FAVOUR OF RESPONDENT NO.5 FOR ESTABLISHMENT OF
SUGAR FACTORY IN BASARKOD VILLAGE, MUDDEBIHAL TALUK,
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VIJAYAPURA DISTRICT. AS HIGHLY ARBITRARY, ILLEGAL AND
WITHOUT AUTHORITY OF LAW AT ANNEXURE-A; AND ETC.
THESE WRIT PETITIONS HAVING BEEN RESERVED FOR
ORDERS, COMING FOR PRONOUNCEMENT THIS DAY,
E.S. INDIRESH J., MADE THE FOLLOWING:
CORAM: HON'BLE MR. JUSTICE E.S. INDIRESH
CAV ORDER
In W.P.No.2274 of 2023, the petitioner-Company is
assailing the order dated 21.09.2022 (Annexure-A)
passed by the respondent No.3, order dated 23.03.2022
(Annexure-AA) passed by the respondent No.2,
communication dated 21.02.2024, issued by the
respondent No.2, inter-alia sought for direction to the
respondent No.3, to issue Distance Certificate to the
petitioner-Company by considering the representation
dated 02.01.2019 (Annexure-B).
2. In W.P.No.16674 of 2023, the petitioner-
Company is assailing the Distance Certificate dated
09.08.2021 (Annexure-A) issued by the respondent
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No.4 in favour of respondent No.5, order dated
25.10.2021 passed by the respondent No.4, in favour of
respondent No.5 (Annexure-B), order dated 30.06.2021
(Annexure-C) passed by the respondent No.1, IEM
(hereinafter referred to as 'IEM') dated 10.12.2021
(Annexure-D) issued by the respondent No.1 in favour
of the respondent No.5, order dated 23.03.2022
(Annexure-E) passed by the respondent No.3 inter-alia
sought for direction to the respondent No.5, to obtain
fresh Distance Certificate as per Annexure-F and further
sought for direction to the respondent No.4 not to issue
Distance Certificate to any other person as per
Annexure-F.
3. Since the question of law involved in these
writ petitions are common with regard to the issuance of
Distance Certificate in favour of the rival sugar factory-
M/s. Nadahalli Ethanol and Allied Industries Ltd., the
petitions were clubbed, heard together and disposed of
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by this common order, by consent of the learned
counsel appearing for the parties.
4. For the sake of convenience, the rank of the
parties are referred to as per their status and ranking in
W.P.No.2274 of 2023.
Facts of the case:
5. In W.P.No.2274 of 2023, the petitioner-
Company, was incorporated for the purpose of
establishment of Sugar Factory and for carrying out
other allied activities. The petitioner-Company had
proposed to establish a Sugar Factory at Kodaganur
Village, Basavana Bagewadi Taluk, Vijayapura District.
In this regard, the petitioner-Company has made an
application to the State Government, seeking issuance
of Distance Certificate as required under the provisions
of Sugarcane (Control) Order, 1966 (hereinafter
referred to as 'SCO, 1966'). In furtherance of the same,
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the closest Sugar Factory from the proposed area of
establishment by the petitioner, situate at the distance
of 16.7 kms (Annexure-D) and as such, the petitioner-
Company was issued with IEM dated 13.08.2010
(Annexure-F in W.P.No. 16674 of 2023).
6. The petitioner-Company in compliance with
the statutory requirement had issued a Bank Guarantee
for sum of Rs.1 Crore, in favour of respondent No.2 and
same was extended periodically. It is further stated
that, the respondent No.2, by order dated 20.12.2018,
(Annexure-J), derecognised the IEM issued in favour of
petitioner and the Bank Guarantee was forfeited. Being
aggrieved by the same, the petitioner-Company has
preferred W.P.No.440 of 2019 before this Court and this
Court vide order dated 14.08.2019, (Annexure-L),
allowed the writ petition by quashing the order dated
20.12.2018 (Annexure-J) passed by the respondent
No.2 (Government of India) and directed the
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respondents therein to re-consider the case of the
petitioner-Company as per the notification dated
24.08.2016. It is contended by the petitioner-Company
that, no date has been fixed by the respondents to hear
the application/representation, as per Annexure-M to
M4. In the meanwhile, the respondent No.4 (M/s.
Nadahalli Ethanol and Allied Industries Ltd.,), had
applied for issuance of Distance Certificate to establish a
new Sugar Factory, and in this regard, the petitioner-
Company has addressed letter dated 03.11.2020
(Annexure-N) to the respondent No.3 to comply with the
order dated 14.08.2019 in W.P.No.440 of 2019. It is
further contended in W.P.No.2274 of 2023 that,
respondent No.3, by order dated 09.08.2021,
(Annexure-W) issued Distance Certificate to the
respondent No.4, by relying on the distance furnished
by Karnataka Geo-Spatial Data Centre, Survey of India,
Bangalore. It is the contention of the petitioner-
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Company that, as the respondents have already issued
IEM in favour of the petitioner-Company to set up Sugar
Factory, and as such, there is no necessity for the
respondents to issue IEM to the respondent No.4, to set
up new Sugar Factory within the vicinity of 15 kms from
the proposed place of Sugar Factory by the petitioner-
Company and as such, the petitioner has made a
representation dated 02.01.2019 (Annexure-B) to the
respondent-Government. In view of not taking further
action in the matter, by the respondents, the petitioner-
Company has filed W.P.No.2413 of 2021 before this
Court, and this Court by order dated 29.06.2022
(Annexure-AB), directed the respondent-authorities to
consider the grievance of both, the petitioner-Company
and respondent No.4, in accordance with law. Pursuant
to the same, the respondent No.2, has passed
impugned order dated 21.09.2022 (Annexure-A)
rejecting the claim made by the petitioner-Company,
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and permitted the respondent No.4, to take further
steps for establishment of new Sugar Factory. Being
aggrieved by the same, the petitioner-Company has
presented W.P.No.2274 of 2023.
7. In W.P.No.16674 of 2023, the petitioner-
Company has challenged the Distance Certificate dated
09.08.2021 issued in favour of the respondent No.5
herein, for establishment of new Sugar Factory at
Basarkod Village, Muddebihal Taluk, Vijayapura District,
as per Annexure-A and B. The petitioner-Company is
also assailing the IEM, dated 30.06.2021 and
10.12.2021 issued by respondent No.1, in favour of
respondent No.5 herein, (Annexure-C and D), as well as
accepting the Bank Guarantee furnished by the
respondent No.5 herein, (Annexure-E). Hence, being
aggrieved by the inaction on the part of the respondent-
authorities for having not considered the claim made by
the petitioner-Company to set up new Sugar Factory,
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and on the other hand, the action of the respondent-
authorities, according permission to the respondent
No.5 to set up new Sugar Factory as well as issuance of
IEM, the petitioner-Company has presented
W.P.No.16674 of 2023.
8. I have heard learned Senior Counsel, Sri. K.G.
Raghavan, appearing on behalf of the learned counsel,
Sri. Swaroop Srinivas for the petitioner- Company in
both writ petitions; Sri. Uday Holla, learned Senior
Counsel appearing on behalf of learned counsel, Sri.
R.B. Sadasivappa, for the respondent- M/s Nadahalli
Ethanol and Allied Industries Ltd in both the petitions;
Sri. Arvind Kamath, learned ASG along with Sri. B.M.
Kushalappa, learned CGC for the respondent-Union of
India and Sri. Mahantesh Shettar, learned Additional
Government Advocate for the respondent-State.
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9. Sri. K. G. Raghavan, learned Senior Counsel
appearing for the petitioner-Company referred to the
judgment of this Court in W.P.No.440 of 2019
(Annexure-L) and contended that, this Court by order
dated 14.08.2019, set aside the order dated 20.12.2018
and further the respondent-competent authority was
directed to re-consider the case of the petitioner afresh
in the light of the SCO, 1966, particularly, with
reference to Clause 6C of Sugarcane (Control)
(amendment) Order, 2016 by passing a speaking order.
It is further argued that, interim order granted by this
Court shall enure to the benefit of the petitioner-
Company till the conclusion of the proceedings before
the respondent-competent authority and therefore, the
action of the respondents accepting the IEM and
according permission to the rival Sugar Factory i.e.
respondent-M/s. Nadahalli Ethanol and Allied Industries
Ltd., to set up new Sugar Factory is incorrect and liable
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to be set aside. It is further argued by the learned
Senior Counsel that, the order dated 20.12.2018,
derecognising the petitioner-Company was contrary to
law and as such, this Court set aside the same and
remanded the matter to the respondent -competent
authority for fresh consideration. Emphasising on these
aspects, learned Senior Counsel for the petitioner-
Company invited the attention to paragraph 19 of the
impugned order produced at Annexure- A, and argued
that, the finding recorded by the respondent No.3, is
contrary to the tenor of the order passed in W.P.No.440
of 2019 and therefore, it is contended that, the
impugned order at Annexure-A, is unsustainable in law
and extraneous consideration has been made by
respondent No.3 while passing the impugned order and
therefore, sought for interference of this Court.
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10. It is further argued by the learned Senior
Counsel for the petitioner-Company by referring to the
order dated 29.06.2022, in W.P.No.2413 of 2021,
(Annexure-AB) that, this court, directed the respondent-
Commissioner therein to consider the representation
dated 02.01.2019 made by the petitioner-Company, and
the representation /objection filed by the rival industry-
M/s. Nadahalli Ethanol and Allied Industries Ltd., and to
pass appropriate orders, and in this regard, the reasons
assigned by the respondent No.3, is contrary to Clause
6C of the Sugarcane (Control) (Amendment) Order,
2016 and accordingly, sought for interference of this
Court. By referring to the impugned order, it is argued
by the learned Senior Counsel that, this Court has
already quashed the order dated 20.12.2018
(Annexure-J), in W.P.No.440 of 2019 and therefore,
there was no occasion for the respondent-authorities to
quash the same thereafter and as such, it is contended
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that, there is a non-application of mind by the
respondent No.3. It is further argued by the learned
Senior Counsel for the petitioner-Company that the
petitioner-Company herein has intended to put up Sugar
Factory and in furtherance of the same, the respondent-
authorities have issued Distance Certificate as per
Annexure-D, way back in the year 2010 and thereafter,
though IEM was issued in favour of petitioner as per
Annexure-F, and further the petitioner has complied
with the conditions stipulated by furnishing the requisite
Bank Guarantee as per Annexure-G, and same was
extended periodically and therefore, derecognising the
IEM by the respondent No.3, as per Annexure-A, is
contrary to the order passed by this Court referred
above as well as Clause 6C of Sugarcane (Control)
(Amendment) Order, 2016 and accordingly, sought for
setting aside the impugned order.
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11. It is further argued by the learned Senior
Counsel for the petitioner-Company that, though the
petitioner-Company has approached the respondent
No.3, in compliance of the order passed by this court in
W.P.No.440 of 2019, however, during the interregnum
period, the respondent No.3, has eagerly issued IEM in
favour of respondent No.4, which makes it clear that the
respondents have acted arbitrarily and therefore, sought
for interference of this Court. Further, Sri. K.G.
Raghavan, learned Senior Counsel for the petitioner-
Company places the reliance on the judgment of the
Hon'ble Supreme Court in the case of Swamy Samarth
Sugars and Agro Industries Ltd., vs. Loknete
Marutrao Ghule Patil Dnyaneshwar Sahakari
Sakhar Karkhana Ltd., and Others reported in
(2022) 14 SCC 1. By referring to paragraph 56 of the
said judgment, it is argued that, there is no automatic
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lapsing of IEM and as such, sought for setting aside the
impugned order at Annexure-A.
12. Per contra, Sri. Uday Holla, learned Senior
Counsel for the respondent- M/s. Nadahalli Ethanol and
Allied Industries Ltd., and Sri. Arvind Kamath, learned
ASG appearing for respondent-Union of India, brought
to the notice of the court with regard to Communication
dated 21.02.2024 and contented that, the respondent-
competent authority has derecognised the IEM of the
petitioner-Company and therefore, sought for dismissal
of the writ petitions.
13. It is further argued by learned ASG that, as
per the order passed by this Court in W.P.No.440 of
2019, personal hearing was held on 15.01.2021, in
which, the representative of the petitioner-Company,
had appeared for the meeting and fair opportunity has
been extended to the petitioner-Company and also
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during the personal hearing, the petitioner was directed
to furnish the additional Bank Guarantee of Rs.50 lakhs
for extension of their IEM and the said commitment was
not met by the petitioner-Company and therefore,
sought for dismissal of the writ petitions. In this regard,
learned ASG refers to order dated 30.12.2020
(Annexure-R3 in W.P.No.2274 of 2023) and contended
that since the petitioner-Company has not complied with
the statutory provisions and therefore, sought for
dismissal of the writ petitions. It is also argued by the
learned ASG that, the draft of minutes of the meeting
dated 15.01.2021 was prepared however, same was not
communicated to the petitioner and therefore, it is
contended by learned ASG that as the representative of
the petitioner-Company was presented in the personal
hearing extended pursuant to the order passed by this
court and involved in the deliberation with regard to
setting up of new Sugar Factory and further, the draft of
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minutes of meeting was prepared at the instance of
representative of the petitioner-Company and as such,
the impugned order at Annexure- A requires to be
confirmed.
14. Sri. Uday Holla, learned Senior Counsel
appearing for the respondent-M/s. Nadahalli Ethanol and
Allied Industries Ltd., invited the attention of the court
to the order passed by this court in W.P.No.440 of 2019,
and in W.P.No.2413 of 2021, and argued that, though
the petitioner-Company has made an application, for
establishment of new Sugar Factory during the year,
2010, till date no efforts have been made by the
petitioner-Company to establish the Sugar Factory and
that apart, such inaction on the part of the petitioner-
Company would jeopardise the sugar cane growers in
Vijayapura District and in this regard, learned Senior
Counsel appearing for respondent- M/s. Nadahalli
Ethanol and Allied Industries Ltd., refers to the finding
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recorded by the respondent No.3 in paragraph 21 to 25
of the impugned order at Annexure-A and argued that,
the respondent No.3 has arrived at a conclusion that,
the petitioner-Company has failed to fulfil its objective
for which the IEM was granted for more than a decade
ago and as a party to cause damage to the rural
economy for more than 15 years and the said aspect
has been considered by the respondent No.3 and
therefore, sought for dismissal of the writ petitions. It is
further argued by Sri. Uday Holla, learned Senior
Counsel appearing for the respondent- M/s. Nadahalli
Ethanol and Allied Industries Ltd., that since, the
petitioner-Company has not furnished the Bank
Guarantee for additional sum of Rs. 50 lakhs as required
under Clause 3 and 6C of the Sugarcane (Control)
(Amendment) Order, 2016, the writ petitions itself are
not maintainable.
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15. It is further argued by Sri. Udaya Holla,
learned Senior Counsel appearing for respondent-M/s.
Nadahalli Ethanol and Allied Industries Ltd. that, the
respondent-authorities having taken note of the interest
shown by the respondent No.4 to set up new Sugar
Factory, have issued Distance Certificate in favour of
respondent No.4, as per Annexures-W and Y and
further, the Central Government has issued IEM in
favour of respondent No.4 as per Annexure-Z to the
writ petition. By referring to the order dated
23.03.2022, (Annexure-AA), it is argued that the
Central Government having accorded permission for
setting up the Sugar Factory to the respondent No.4,
with a direction to take effective steps within a period of
three years, and to commence production within a
period of five years from the date of issuance of IEM,
the respondent No.4 had taken steps in this regard and
accordingly, sought for dismissal of the writ petitions. In
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order to counter the submission of the learned Senior
Counsel for the petitioner-Company, Sri. Uday Holla,
learned Senior Counsel for respondent No.4- M/s.
Nadahalli Ethanol and Allied Industries Ltd., argued that,
SCO, 1966 itself stipulates that IEM could be extended
up to 7 years only from the date of its issuance and as
the said IEM issued on 13.08.2010 in favour of the
petitioner-Company, which came to be expired by end
of August 2017 and therefore, learned Senior Counsel
for the respondent No.4, supports the finding recorded
by the respondent No.3. In order to buttress his
arguments as the IEM of the petitioner-Company lapsed
automatically, Sri. Uday Holla, learned Senior Counsel
appearing for respondent No.4 refers to the judgment of
the Hon'ble Supreme Court in the case of T.N.Rugmani
and Another vs. C. Achutha Menon and Others
reported in 1991 Supp. (1) SCC 520 and argued that,
the right of the petitioner is to be considered as on the
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date of the filing of the application seeking IEM and not
on subsequent events and therefore, the petitions lack
bonafides and as such, sought for dismissal of the writ
petitions.
16. In the light of the submission made by the
learned counsel appearing for the parties, the facts are
that the petitioner-Company has made an application
seeking, issuance of IEM for the purpose of
establishment of a new Sugar Factory at Kodaganur
Village, Basavana Bagewadi Taluk, Vijayapura District.
The Director of Karnataka Geo-Spatial Data Centre by
letter dated 18.06.2010 (Annexure-D) issued Distance
Certificate to the petitioner-Company. Pursuant to the
same, the respondent-Government forwarded the
Distance Certificate issued in favour of the petitioner-
Company, to the Government of India as required
under Clause 6(A) of the SCO, 1966. The Government of
India by its letter dated 13.08.2010 issued IEM, in
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favour of petitioner (Annexure-F). The petitioner-
Company has furnished the Bank Guarantee to the
respondent No.3, on 09.09.2010, as per Annexure-G. It
is forthcoming from the recitals in Annexure- G and H
that, the Bank Guarantee furnished by the petitioner-
Company was extended till 07.03.2020. The
Government of India, by its order dated 20.12.2018
(Annexure-J), derecognised the IEM issued in favour of
the petitioner-Company and forfeited the Bank
Guarantee. Feeling aggrieved by the same, the
petitioner-Company has approached this court in
W.P.No.440 of 2019 and this Court, by order dated
14.08.2019, set aside the order at Annexure-J, and
directed the respondent No.3 to re-consider the case
afresh, in the light of the provisions Clause 6C of the
Sugarcane (Control) (Amendment) Order, 2016.
Paragraphs 5 and 6 of the order passed by this court
reads as under:
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"5. Learned counsel for the petitioner while inviting the
attention of this Court to the notification dated 24.08.2016
submitted that in exercise of powers under Section 3 of the
Essential Commodities Act, 1995, Sugarcane (Control) Order was
amended, which came into force on 24.08.201. Clause 6C of the
amended Sugarcane (Control) Order, 2016 provides that the
time limit for setting up of industrial unit including extension in
seven years and if the industrial unit could not be set up due to
reasons beyond the control of entrepreneur, then the
performance guarantee shall be forfeited. It is further submitted
that the impugned order be quashed and the competent
authority be directed to consider the case of the petitioner in the
light of the notification date 20.08.2016. The aforesaid prayer
has not been fairly opposed by learned counsel for the
respondent.
6. In view of the submissions made and taking into account
the fact that while passing the impugned order dated
20.12.2018, the effect and impact of the Sugarcane (Control)
(Amendment) Order, 2016 has not been taken into account by
the competent authority, the impugned order is hereby quashed
and set aside and the competent authority is directed to consider
the case of the petitioner afresh in the light of the notification
dated 24.08.2016 by which the Sugarcane (Control) Order was
amended and in particular, in the light of the provisions of Clause
6C of the Sugarcane (Control) (Amendment) Order, 2016 by a
Speaking order within a period of six weeks from today."
(Underlined by me)
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17. It is also relevant to extract the separate
order dated 25.09.2019 in W.P.No.440 of 2019, which
reads as under:
"After hearing learned counsel for the parties, it is directed
that in the order dated 14.08.2019 passed in W.P.No.440/2019
in paragraph No.5, the word 'forfeited' shall be read as
'returned'.
This order shall be read in conjunction with the order dated
14.08.2019 passed in W.P.No.440/2019.
Accordingly, I.A.No.3/2019 is disposed of."
(Underlined by me)
18. Pursuant to the same, the petitioner-Company
has made an application dated 06.06.2019 (Annexure-
K), seeking issuance of Distance Certificate. The
respondent No.4, has filed an application on 05.10.2020
seeking issuance of Distance Certificate for
establishment of new Sugar Factory, and as such, the
petitioner-Company has made representation dated
02.01.2019, to the respondent No.3, and as the said
representation was not considered by the competent
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authority, the petitioner-Company has filed
W.P.No.2413 of 2021 before this Court, and this court
vide order dated 29.06.2022 (Annexure- AB), directed
the respondent No.3-authority to consider the
representation made by the petitioner along with the
representation/objection raised by respondent No.4.
Perusal of paragraph 3 of the order passed by this court
in the above writ petition makes it clear that the
respondent No.3-authority has to consider the both the
applications/objections filed by the petitioner-Company
and respondent No.4 and to pass appropriate orders.
Learned Senior Counsel representing the respondent
No.4, brought to the notice of the Court in respect of the
order dated 23.03.2022, according permission to
respondent No.4 to set up new Sugar Factory at
Basarkod village, Muddebihal Taluk, Vijayapura District.
In the backdrop of these aspects, though the learned
Senior Counsel appearing for the petitioner-Company
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submitted that, there is no automatic lapsing of the IEM,
unless the necessary consequences of de-recognition of
IEM are under taken, by the respondent-authorities. In
the light of the Scheme of the SCO, 1966, it is relevant
to extract, Clause 6A to 6D of the SCO, 1966, which
reads as under:
"6-A. Restriction on setting up of two sugar factories
within the radius of 15 kms.--Notwithstanding anything
contained in Clause 6, no new sugar factory shall be set up
within the radius of 15 kms of any existing sugar factory or
another new sugar factory in a State or two or more States:
Provided that the State Government may with the prior
approval of the Central Government, where it considers
necessary and expedient in public interest, notify such minimum
distance higher than 15 kms or different minimum distances not
less than 15 kms for different regions in their respective States.
Explanation 1.--An existing sugar factory shall mean a
sugar factory in operation and shall also include a sugar factory
that has taken all effective steps as specified in Explanation 4 to
set up a sugar factory but excludes a sugar factory that has not
carried out its crushing operations for last five sugar seasons.
Explanation 2.--A new sugar factory shall mean a sugar
factory, which is not an existing sugar factory, but has filed the
Industrial Entrepreneur Memorandum as prescribed by the
Department of Industrial Policy and Promotion, Ministry of
Commerce and Industry in the Central Government and has
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submitted a performance guarantee of rupees one crore to the
Chief Director (Sugar), Department of Food and Public
Distribution, Ministry of Consumer Affairs, Food and Public
Distribution for implementation of the Industrial Entrepreneur
Memorandum within the stipulated time or extended time as
specified in Clause 6-C.
Explanation 3.--The minimum distance shall be
determined as measured by the Survey of India.
Explanation 4.--The effective steps shall mean the
following steps taken by the concerned person to implement the
Industrial Entrepreneur Memorandum for setting up of sugar
factory.--
(a) purchase of required land in the name of the factory;
(b) placement of firm order for purchase of plant and machinery
for the factory and payment of requisite advance or opening of
irrevocable letter of credit with suppliers;
(c) commencement of civil work and construction of building for
the factory;
(d) sanction of requisite term loans from banks or financial
institutions;
(e) any other step prescribed by the Central Government, in this
regard through a notification.
6-B. Requirements for filing the Industrial
Entrepreneur Memorandum.--(1) Before filing the Industrial
Entrepreneur Memorandum with the Central Government, the
concerned person shall obtain a certificate from the Cane
Commissioner or Director (Sugar) or Specified Authority of the
concerned State Government that the distance between the site
where he proposes to set up sugar factory and adjacent existing
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sugar factories and new sugar factories is not less than the
minimum distance prescribed by the Central Government or the
State Government, as the case may be, and the concerned
person shall file the Industrial Entrepreneur Memorandum with
the Central Government within one month of issue of such
certificate failing which validity of the certificate shall expire.
(2) After filing the Industrial Entrepreneur Memorandum,
the concerned person shall submit a performance guarantee of
rupees one crore to Chief Director (Sugar), Department of Food
and Public Distribution, Ministry of Consumer Affairs, Food and
Public Distribution within thirty days of filing the Industrial
Entrepreneur Memorandum as a surety for implementation of
the Industrial Entrepreneur Memorandum within the stipulated
time or extended time as specified in Clause 6-C failing which
Industrial Entrepreneur Memorandum shall stand de-recognized
as far as provisions of this Order are concerned.
6-C. Time limit to implement Industrial
Entrepreneur Memorandum.--The stipulated time for taking
effective steps shall be two years and commercial production
shall commence within four years with effect from the date of
filing the Industrial Entrepreneur Memorandum with the Central
Government, failing which the Industrial Entrepreneur
Memorandum shall stand de-recognized as far as provisions of
this Order are concerned and the performance guarantee shall
be forfeited:
Provided that the Chief Director (Sugar), Department of
Food and Public Distribution, Ministry of Consumer Affairs, Food
and Public Distribution on the recommendation of the concerned
State Government, may give extension of one year not
exceeding six months at a time, the implementing the Industrial
Entrepreneur Memorandum and commencement of commercial
production thereof.
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6-D. Consequences of non-implementation of the
provisions laid down in Clauses 6-B and 6-C.--If an
Industrial Entrepreneur Memorandum remains unimplemented
within the time specified in Clause 6-C, the performance
guarantee furnished for its implementation shall be forfeited
after giving the concerned person a reasonable opportunity of
being heard."
(Underlined by me)
19. Clause 6A of the SCO, 1966, provides that, no
new Sugar Factory shall be set up within the radius of
15 km of any existing Sugar Factory. Explanation IV to
Clause 6A provides for effective steps shall be taken by
the Sugar Factory to implement the IEM. Clause 6B of
the SCO, 1966 provides for filing of IEM before the
Central Government and permission to be accorded by
the Central Government based on the report of the
State Government including minimum distance
prescribed therein. Clause 6B(2) provides for pre-
requisite deposit of Rs. One Crore, with the State
Government within 30 days of filing IEM as a security
for implementation of IEM. Clause 6C of SCO, 1966
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stipulates that, if no steps are taken to commence the
production in the Sugar Factory within four years, from
the date of filing of IEM, with the Central Government,
the IEM shall stand derecognised. Perusal of Clause 6C
makes it clear that, the said Clause does not provide for
any specific order being made declaring the
derecognition of IEM and derecognition of IEM would
takes place through operation of law. In this regard, it is
relevant to extract paragraphs 85 to 90 in the case of
M/s. Harsha Sugars Ltd., vs. The Director (Sugar)
and others in W.P.No.102585 of 2022 disposed of
16.12.2022 which reads as under:
"85. The event which attracts the de-recognition is the failure
to commence commercial production of sugar and this is
obviously possible only if a sugar factory is established. In fact,
even if a sugar factory is half complete or almost complete, the
event of de-recognition cannot be avoided and it is automatic.
The one and only way to escape de-recognition of the IEM is to
ensure commercial production has commenced.
86. To put it in simple terms, the de-recognition of an IEM is
an irreversible event and the forfeiture of the performance
guarantee would also follow automatically in the normal course.
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87. However, Clause 6-D stipulates that the project
prominent is required to be heard before the performance
grantee is forfeited. This is obviously because the legislature
wanted to afford an opportunity to the project proponent to
establish that he had already lost the substantial investments
that he had made as a result of the de-recognition of the IEM
and he should not be made to suffer a further loss by an order of
forfeiture. Thus, a small window of opportunity to prevent
further losses by way of forfeiture is granted to the project
proponent under Clause 6-D.
88. It is to be noticed here that there is no provision made
for hearing a project proponent before de-recognising the IEM,
obviously, because the de-recognition of an IEM is automatic
which cannot be avoided if commercial production is not
commenced.
89. However, a forfeiture of the performance guarantee can
be avoided if the project proponent is able to establish at the
hearing statutorily provided that his failure to implement was for
some justifiable reason.
90. In this process of considering whether the project
proponent deserves the return of the performance guarantee for
non implementation of the IEM, the authority cannot entertain a
plea for nullifying the de-recognition by granting extensions of
time for implementing the IEM."
(Underlined by me)
20. The entire object of Clause 6A to 6D of the
SCO, 1966 embodies that, the Sugar Plant has to be
established within the time frame specified therein. In
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that view of the matter, though there is no automatic
lapsing of IEM, however, if the condition precedent for
establishing the factory as mentioned in the aforesaid
provisions, are not complied within the time frame of 4
years as contemplated under Clause 6A to 6C of the
SCO,1966, then, it has to be held that, there is
automatic lapsing of IEM. In this regard, it is relevant to
quote the judgment of the Hon'ble Supreme Court in the
case of M/s. Ojas Industries (P) Ltd., vs. M/s Oudh
Sugar Mills Ltd., reported in (2007) 4 SCC 723,
wherein the Hon'ble Supreme Court upheld the validity
of amendment to SCO, 1966. The aforementioned
judgment was reiterated by the Division Bench of the
Bombay High Court in the case of Sahyadri Sahakari
Sakhar Karkhana Ltd vs. Union of India and Others
in W.P.No.13816 of 2023 disposed of on 06.06.2025.
Paragraph 30 reads as under:
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"30. It is next contended that in view of such judicial
pronouncement, the expert opinion of the Department of Legal
Affairs was sought in the matter 1 Civil Writ Petition No.31199 of
2005, Judgement dated 01.2.2006 was rendered to the effect
that since there was no provision to provide the limits in regard
to a minimum distance between the two existing or proposed
sugar mills in the SCO 1966, the same be amended suitably,
and it is in such context the process was initiated to amend the
SCO 1966. It is stated that also an order passed by the Supreme
Court in M/s. Balrampur Chini Mills Ltd. Vs. Ojas Industries Pvt.
Ltd. & Ors.3 wherein the Supreme Court opined that the
difficulties highlighted in the context of SCO 1966 are required to
be ironed out by the GOI, and it is in such context by an order
dated 10 November 2006, GOI brought about the amendments
to SCO 1966 by incorporating Clauses 6A to 6E. It is next
contended that the Supreme Court in its order dated 2 April
2007 in M/s. Ojas Industries (P) Ltd. Vs. M/s. Oudh Sugar Mills
Ltd., & Ors. has upheld the validity of the SCO 2006
Amendment. The following observations of the Supreme Court
are highlighted by the Government of India:
"We hold that the Sugarcane (Control) (Amendment)
Order,2006 imposes a bar on the subsequent IEM holders in
the matter of setting up of new sugar factories during the
stipulated period given to the earlier IEM holders to take
effective steps enumerated in Explanation 4 to 6A of
Sugarcane (Control) (Amendment) Order, 2006 dated
10.11.2006. We further hold that the said 2006 order
operates retrospectively".
"........if the first IEM holder or the earlier IEM holder takes
effective steps to implement its IEM then the subsequent IEM
holder cannot proceed with his IEM. If the first IEM or earlier
IEM holder completes its projects successfully then the
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remaining IEMs for that area shall become non est. They
shall, however, remain in suspense during stipulated period
when the earlier IEM holder takes effective steps for
implementing its IEM."
21. Following the aforementioned dictum of the
Bombay High Court and the Hon'ble Supreme Court,
referred to above, I am of the opinion that, the
judgment referred to by the learned Senior Counsel for
the petitioner-Company is not applicable to the facts
and circumstances of the present case. It is not in
dispute that the personal hearing was extended to the
representative of the petitioner-Company on
15.01.2021, pursuant to the judgment of this court, in
W.P.No.440 of 2019 and W.P.No.2413 of 2021. It is also
pertinent to mention herein that, the respondent No.4-
M/s. Nadahalli Ethanol and Allied Industries Ltd., has
produced the letter dated 31.01.2024 issued by the
Karnataka State Pollution Control Board, with regard to
efforts made by the respondent No.4 to establish the
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New Sugar Factory inter-alia acquisition of land for the
purpose of setting up of Sugar Factory, reflects the
ground work undertaken by the respondent No.4 to
establish a new Sugar Factory, which undoubtedly, sofar
not done by the petitioner-Company for more than 15
years. It is also forthcoming from the Communication
dated 21.02.2024, issued by Central
Government/Government of India, wherein, the
petitioner-Company was advised to give written
submission regarding, furnishing of additional Bank
Guarantee of Rs.50 lakhs for extension of IEM, and in
this regard, no reply has been given by the petitioner-
Company. Though it is argued by the learned ASG that,
it is only a draft of minutes of the meeting, however,
the said meeting was attended by the representative of
the petitioner-Company and same was not disputed by
either of the parties and further, even if there is no
written communication to the petitioner-Company,
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however, the said aspect of the matter was within the
knowledge of the petitioner-Company as the
representative of the petitioner-Company attended the
meeting and therefore, the reasons assigned in the
Communication dated 21.02.2024 by the respondent
No.2 is to be accepted. It is also pertinent to mention
here that the order passed by this Court in W.P.No.440
of 2019 quashing the order dated 20.12.2018 is merged
with the order passed by this Court in W.P.No.2413 of
2021 wherein, this Court directed the respondent-
competent authority to consider the claim made by both
the petitioner and respondent No.4 and take decision in
the matter in accordance with law, and therefore, the
petitioner-Company cannot claim preference over
respondent No.4 with regard to establishment of Sugar
Factory and therefore, the arguments advanced by the
learned Senior Counsel appearing for the petitioner
cannot be accepted.
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22. Nextly, on careful consideration of Annexure-
A, wherein, the respondent No.3, after considering the
entire material on record, as well as the direction issued
by this Court, as culled out at paragraph 10 of the
impugned order and also taking into consideration the
lack of interest on the part of the petitioner-Company to
implement in establishing the factory since, 2010, a
detailed discussion with regard to the economic viability
of the State to provide facilities to the sugarcane
farmers who have been, eking out their livelihood in the
District of Vijayapura, as per paragraphs 21 to 25,
rightly, passed the impugned order dated 21.09.2022,
which requires to be confirmed in these petitions. The
entire, pleadings and arguments of the petitioner-
Company is with regard to establish the Sugar Factory
since, 2010 however, same has not been materialised
till date and on the other hand, the efforts made by the
respondent No.4, to establish factory in the interest of
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farmers in the district has been rightly analysed by the
respondent No.3 in the impugned order at Annexure-A
and therefore, no interference is required in these writ
petitions. It is also to be noted from Annexure-AA that,
the Central Government passed an order with a
direction to the respondent No.4 to take effective steps
to establish new Sugar Factory within a period of 3
years and to commence production within a period of 5
years from the date of issuance of IEM and pursuant to
the same, respondent No.4 produced the relevant
documents and made efforts to establish Sugar Factory
in Vijayapura District as stated above. Therefore, I am
of the opinion that, the contention raised by the learned
Senior Counsel for the petitioner-Company cannot be
accepted by considering the scope and ambit of Clause
6A to 6D to SCO, 1966 which mandates on
establishment of the proposed Sugar Factory at the
earliest possible time to procure sugarcane in the
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locality and therefore, these writ petitions requires to be
dismissed as devoid of merits. Accordingly, the writ
petitions are dismissed.
SD/-
(E.S.INDIRESH)
JUDGE
SB
