hvn IN THE HIGH COURT OF JUDICUATURE AT MUMBAI CIVIL APPELLATE SIDE PUBLIC INTEREST LITIGATION NO.259 OF 2009 1. Bhimshakti Vichar Manch a Trust registered under the provisions of Bombay Public Trust Act, having office at Dr. Ambedkar Chowk, Bhim Nagar, Bhavsingpura, Aurangabad 431 001, 2. Shri. Chetan Janardhan Kamble, President of Petitioner No.1, An adult, occupation : Social Work, having address at Dr. Ambedkar Chowk, Bhim Nagar, Bhavsingpura, Aurangabad 431 001 & Others ... Petitioners Versus 1. State of Maharashtra, through the Secretary, Home Ministry, Mantralaya, Mumbai. 2. Commissioner of State Excise Department, Maharashtra State, Mumbai, having office at Old Custom House, 2nd Floor, Shahid Bhagat Singh Marg, Fort, Mumbai 400 023. 3. Union of India, through the Secretary of Agricultural Ministry, having office at New Delhi 4. Mr.Vasant Haribau Nirve, Resident of Utvat, Taluka & District Jalna, Maharashtra. 1 5. Mr.Digambar Suryabhan Rathod, Resident of Savangitalana, At Post Pathrud, District Jalna. 6. Mr.Badri Ramchandra Chavan, 7. Mr.V.N. Shelke 8. Mr.Anil Dasu Chavan 9. Jeevan Raju Rathod. All residents of Pahegaon, At Post Pathrud, District Jalna, Maharashtra. 10. Mr.Bhagwat Radhakisan Chaware, 11. Mr.Suresh P. Kadam, At Post Devmurti, District Jalna, Maharashtra. 12. Mr.Nandu Baburao Khandebharad. 13. Mr.Ramchandra Narayan Kulkarni, Both resident of Savked Boir, Taluka Deoulgaonraja, District Buldhana. 2 14. Mallikarjun Langate, Resident of Shingaon, Jehagir, Taluka Deoulgaonraja, District Buldhana. 15. Baburao Gopalrao Khandebharad 16. Madhukar Venkatrao Wagh. 17. Vishram Eknath Wagh 18. Anil Maruti Wagh. 19. Vithal Sukhdev Giram, 20. Rameshwar Maruti Kailkar All resident of Pangri vllage, At Post Shingaon, Jagir, Taluka Deoulgaonraja, District Buldhana. 21. Govind Biradhar 22. Arvind Manikrao Patil. 23. Bhalchandra Manikrao Patil. 3 24. Madhukar Govindrao Patil 25. Mr.Dagadu Bhikaji Solanke, 26. Kamla Chandurao Jadhav 27. Subhas Vishwanath Solanke 28. Sahaji Bajirao Solanke 29. Shrimant Govindrao Gomsale 30. Dilip Patil, 31. Dinesh Shivlal Rathod R/o: Shivni A/P Ner, Dist. Jalna. 32. Pandurang Sukhdeo Giram, R/o Pangri, A/P Shingaon, Dist. Buldhana. All residents of Taluka Nilangar, District Latur. 33. M/s. Morya Distilleries Pvt. Ltd. 4 Having its office at 81, Prabhat Centre, CBD Belapur, Navi Mumbai- 400703 and having its Factory at Plot No.A-96 MIDC, Paithan, Aurangabad. 34. Yashraj Ethanol Processing (P) Ltd. having its Registered Office at Plot No.445/02, Opp. D.S.P. Bungalow, Sardar Bazar, Satara- 415 001. 35. M/s. Mallikarjun Distilleries Pvt. Ltd. Having its office at 10, 11, 3rd Floor, Chinar Building, Opp. Krushi Bhavan, Near Sakhar Sankul, Shivaji Nagar, Pune and having its Factory at Gut No.51, Babargaon, Taluka Gangapur, District Aurangabad. 36. Viraj Alcoholic & Allied Industries Ltd. , having factory at Kapri, Taluka Shirala, District Sangli. 37. M/s. Grainotch Industries Ltd., having its office at 1, Govind Apartment, 5 N.D.Patel Road, Opp. Telephone Exchange, Nashik- 422001. 38. M/s. Prathamesh Agro Chemicals Pvt. Ltd. having its office at 802, Chaitanya Apartments, Bhakti Marg, Law College Road, Pune- 411004. 39. M/s. Radico N.V. Distilleries Maharashtra Ltd., Having its Registered office at D-192 to D-195, MIDC Shendra, Fivestar Industrial Area, Aurangabad- 431201. 40. M/s. Vithal Distilleries having factory at A/P, Nimgaon, Taluka Madha, Maharashtra. 41. M/s. The Saswad Mali Sugar Factory Ltd, having its office at Malinagar, Dist. Solapur -413108 42. M/s. Adlars Bioenergy Ltd. Having its office at 2, Shubhashree Society, 6 Ghole Road, Shivaji Nagar, Pune- 411005 and having its factory at Survey No. 284 B, Subhash Nagar, Gaurgaon, Off Latur- Barshi Road, Taluka Kallam, District Osmanabad. 43. Shri Venkateshwara Bio-Refineries & Bio- Fuels Pvt. Ltd, having its office at F-2, Shanta Durga Sankul, 650, B, Opp Deval Club, Khashab, Kolhapur- 416012 44. Pranav Agrotech Having its factory at Babargaon Fata, Taluka Gangapur, District Aurangabad. 45. G.N. Agrotech Industries, having its factory at Basle Gaon, Taluka Akkalkot, Dist- Sholapur, Maharashtra 46. Victoria Agro Food Processing Pvt. Ltd, having its office at LIC Colony, Ring Road, Latur, Maharashtra 47. Tilaknagar Industries Limited 7 Having its factory at Shrirampur and Corporate Office at Industrial Assurance Bldg., 3rd floor, Churchgate, Mumbai-400 020. 48. Maharashtra Rajya Shetkari Sangathana, through its Chairman Shri Laxman Vishwanathrao Vadle, having office at A/P Islampur, District Sangli, Maharashtra ……… Respondents Mr. Mr. Uday Warunjikar with Mr. Nitesh Bhutekar and Mr.Rahul More for the petitioners. Mr. R.M. Kadam, Advocate General, with Mr.S.R.Nargolkar, Asst. Govt. Pleader for Respondent Nos. 1 & 2. Mr.S.R.Ganbavale for respondent No.3. Mr.Subodh Dharmadhikari, Senior Advocate, with Mr.S.Garud i/b. Khaitan & Jayakar for the applicants in C.A. Nos.18/2010 to 21/2010 & 25/2010. Mr.V.R.Dhond i/b. Mr.Aditya Mithe for the applicants in C.A.No. 22/2010. Mr.P.S.Dani i/b. Mr.Nikhil Chaudhary for the applicants in C.A.No. 24/2010. 8 CORAM : FERDINO I. REBELLO & J.H. BHATIA, JJ. DATED : MARCH 10, 2010 ORAL JUDGMENT (Per Ferdino I. Rebello,J.): Rule. By consent of parties, heard forthwith. 2. The Petitioner No. 1 is a trust registered under the provisions of the Bombay Public Trust Act. Petitioner No. 2 is a citizen of India. Petitioners are challenging the scheme framed by the State of Maharashtra, Respondent No. 1 and notified under G.R. Dated 8.6.2007, which is known as Foodgrain based Distillery Integrated Finance Scheme. According to Petitioner in the State of Maharashtra Alcohol is distilled from molasses which is a byproduct in the manufacture of sugar. This Alcohol with addition of additives can be used as fuel. The use of such Alcohol reduces pollution. Molasses are available as raw material in the State of Maharashtra and as such respondent State ought to encourage manufacture of Alcohol from molasses, instead of encouraging foodgrain based distilleries. The scheme was formulated after the policy decision in the meeting of the Cabinet dated 16.5.2007. Under the scheme if a distillery is set up for manufacture of Alcohol the manufacturers are eligible for financial incentives of Rs. 10 per ltr by way of concession from excise duty. Similarly subsidy ranging from 150% to 200% is also provided under the scheme. According to the Petitioners about 35 letters of intent were issued under this scheme by Respondent No. 1 and 2 out of which 14 units have commenced production. On 20.8.2009 the Cabinet took a decision that no further proposals will be considered and no letter of intent would be issued for such 9 distilleries. The Government Resolution has been issued to that effect on 31st August, 2009. 3. The Petitioner obtained information under the provisions of Right to Information Act that on coming to know through newspaper report that such units are held eligible for the grants running into crores of rupees. This information further showed that Directors of all the beneficiaries are political personalities. They are either politicians or office bearers of various political parties or are the near or dear ones of the politicians. The list shows the units functioning in rural Maharashtra. Majority of the units are functioning in drought affected area or alternatively in areas known for their industrial poverty and other similar regions. The units which are sanctioned also fall in areas where already there is substantial cultivation of sugarcane and there are sugar factories which are in existence. The decision of the State to provide grants is creating serious issue about the real intention of the introduction of the scheme. If the State wanted to entertain enterprenurs, different scheme could have been introduced. According to the Petitioner, even the Finance Ministry of the Government has raised objection to the grant of 200% subsidy. 4. Petitioner next sets out that in the State there are several citizens who are unable to get sufficient food. Poverty amongst other reasons has resulted into death of the agriculturists. Similarly there are cases of death of citizens on account of mal- nutrition. The policy decision of the State therefore, is not justifiable. The foodgrain which is used for manufacture of alcohol is essential food for the citizens 10 facing scarcity in so far as the State of Maharashtra is concerned. On the one hand the Union of India requires to import foodgrains from foreign countries including wheat, sugar etc. and on the other hand the State has introduced a scheme for foodgrain based distilleries. 5. Foodgrains are essential commodities and there are various schemes which are introduced by the Respondent No. 1 for distribution of food grains. Considering this, the scheme for granting of subsidy for manufacture of alcohol is contradictory to the scheme for distribution of food grains in the Sate of Maharashtra which itself has not been implemented in a proper manner. Also it is the Union of India which could have taken decision about establishment of such distilleries. The power to determine the contents of the percentage of additives to be used as a denaturent for alcohol is with Respondent No. 3 and the Respondent No. 1 does not have the authority to take such decision. The Finance Department of the State had raised various objections including of its inability to make any budgetary provisions for providing finance to beneficiaries of the scheme. Similarly finance Department was of the view that the proposal submitted to the Cabinet that there would be increase in the area under cultivation of Jowar appeared improbable. The Finance Department has also raised an objection that it cannot be the object or duty of the State Government to minimize the difference between the demand and supply of wine. Various other objections were raised including that the proposal in question was virtually defeating the interest of the sugar factories which are established in the State of Maharashtra. There are 127 sugar factories organized and run in the Cooperative field and there are 53 private sugar factories. Similarly there are in all 11 64 winery units which are in existence, out of which 51 are wineries which are run by the Cooperative units and 13 are winery units which are run by private managements. These 64 units in the State of Maharashtra have enough potential for manufacturing the wines which are based on molasses. This would show that there is no need for the other units, more particularly based on foodgrains. The note submitted to the cabinet would show that there are three units distilling alcohol on the basis of foodgrains. Out of which one unit is working, one unit is closed and the third unit is selling the alcohol outside the State of Maharashtra, as there is sufficient demand. As such the proposal could not have been sanctioned by the cabinet. 6. If the object of the State was to encourage agriculturists from the drought affected areas, there are other different schemes which can be introduced than the scheme in question. The present scheme can not be called as a sole method or means to encourage the agriculturist from the drought affected areas. Further the logic behind grant of finance of Rs. 10/- per liter to the manufacturer appears to be to to reimburse the capital investment within minimum years. This goes to show that the scheme in question was intended to protect the interest of the investors. Merely on the ground that there are two states in the entire India where such scheme has been introduced on experimental basis, it cannot be said that in the State of Maharashtra such a scheme should be introduced. There is no certainty whether the project in question or because of the scheme that there will be self sufficiency in so far as foodgrains are concerned. The Planning Department of the State had also raised an objection stating 12 that in last 7-8 years, prior to submission of their notings, that there was decrease in the manufacture of Jowar crop as well as decrease in the area under cultivation. The statistic in respect of the decrease have been set out which would show that there is fall in the area of land under Jowar cultivation. Similarly the per hectare yield of Jowar has also gone down in last 7-8 years. In the year 1996-97 it was 10.95 lac. quintals which had come down to 8.89 lac. quintals in the year 2003-04. If the actual loss in the manufacture of grain based alcohol is only Rs. 6 /- per liter then there is no justification for granting subsidy of Rs. 10/- per liter. The scheme it is submitted is based on uncertain events which are beyond the control of human beings and depends on the rainfall. The scheme as such is arbitrary as well as unreasonable. In fact existing units based on foodgrains are manufacturing alcohol without any subsidy, 7. The learned counsel has formulated his submissions as under : (1) that policy of the State is arbitrary and unreasonable and also irrational and therefore violative of article 14 of the Constitution of India. (2) Diverting the foodgrains required by citizens for consumption for manufacture of alcohol affects the right to life and livelihood of the citizens in as much as they have or are denied access to foodgrains. The policy even otherwise is against the fundamental rights and directive 13 principles/fundamental duties enshrined by the Constitution of India in dealing with a trade which is res extra commercium and consequently affects the right to life guaranteed under Article 21 of the Constitution of India. (3) Giving of subsidy can only be done by an Act of legislature and not by Executive instructions. Apart from that the public revenue is affected. (4) Public revenue is affected in as much as subsidy is being given denying .... resources to citizens. 8. A reply has been filed on behalf of Respondent Nos. 1 and 2. It is their case that the petition is liable to be dismissed at the threshold as it is not in the public interest and exhibits gross delay and laches. The Petitioner it is set out appears to have been put up by sugarcane based distilleries or groups who are competitors and business rivals of grain based distilleries. The real intention behind the petition is to deny to the grain based distilleries the subsidy they are entitled to after having acted in pursuance of the impugned scheme and after having incurred substantial financial expenditure and liability. This is with a view to subject them to economic duress and/or increase the sale price of their spirit/alcohol and make them less competitive. 9. The G.R. was issued on 8.6.2007. This scheme was prospectively discontinued vide G.R. Dated 31.8.2009. The Petition has been field on 11th December, 2009 i.e. after the discontinuance thereof. There is no explanation whatsoever for the inaction of the Petitioner. The Petitioner waited whilst persons relying upon the scheme in question, undertook financial obligations, set up and/or 14 undertook the setting up of distilleries, based on the representation/projection that subsidies would be forthcoming. These persons having done so, the Petitioner now seeks to deny them the said benefits. The delay in filing the Petition appears to be with this deliberate intent to ensure that such persons who are business rivals/competitors of the persons whose cause the petitioner really asserts acted on the scheme and altered their position irreversibly. The Petitioners have also not joined all necessary parties. 10. The scheme is a pure policy decision which identifies a particular class (grain based distilleries) as being eligible for limited financial incentive considering the significant advantages and benefits flowing therefrom. The scheme is in public interest and has been introduced bona fide after considering all relevant facts, balancing different interests and is eminently sensible and fair. In the matter of State policy, the power of judicial review is circumscribed and sparingly exercised and policy makers are tobe given the greatest freedom/latitude and play at the joints. On the facts of the present case, there is no warrant for any interference or judicial interdict and the policy decision of Respondent No. 1 ought not to be interfered with. Dealing with the issue of rationale of the policy, it is set out that the policy was based on a study carrried out by Mitcon Consultancy Services Limited who had submitted a report dated 24.03. 2004 on technological aspects of manufacturing Ethyl Alcohol from cereal grains in Maharashtra. Molasses available from various distilleries which manufacture sugar was an average 18 to 20 m.t. ever year, for conversion into alcohol. As such there was sufficient distillation capacity to process all the available molasses in the State. The 91 distilleries which were operational, in 15 fact, had excess capacity to process molasses produced in the State for conversion into alcohol. The production of alcohol from molasses had been around 38 to 40 Crores litres per annum. For the preceding 5-6 years, the Sate of Maharashtra enjoyed a comfortable situation in respect of availability of alcohol both for potable as well as industrial sector. The export of molasses ENA to neighbouring States like Karnataka, A.P. Kerala was of the order of 3-4 Cr. Ltrs. per annum. Around 32-36 cr. Ltrs was available for consumption in the State (potable as well as industrial sector). The potable sector for the preceding 4-5 years had been consuming alcohol between 10-12 Cr. Ltrs per annum and the balance about 20-22 cr. Ltrs. was being used by industry. Restarting of one unit has increased the demand by 15 cr. Ltrs. Per annum. The Industrial Chemical Manufacturing Association had given a projected demand of industrial alcohol for 2006-07 only for major units at the level of 42 cr. Ltrs. Per annum including the M & T.P. Manufacturing units. Thus there was a surge of 80% in the demand of industrial alcohol over the average consumption of 20-22 cr. Ltrs. Per annum. The potable sector had also shown significant increase in demand during the year 2005-06. 11. Sugar is a highly water intensive crop which requires irrigated land and can not be cultivated in purely rainfall dependent areas. Adding substantial areas to sugar cane cultivation was therefore, not a realistic or feasible option. Also the manufacture of alcohol from Molasses results in comparatively high level of air and water pollution and/or effluent discharge. Thus adding to the molasses based alcohol 16 production capacity was not considered environmentally friendly. As such there was a need to find out alternate sources of raw materials for production of alcohol, so that the molasses based alcohol could be diverted for use in industry. One solution, which addressed/redressed this problem, was to use grain based alcohol to meet the demands of potable and M & TP manufacturing units. The production of grain based alcohol was not prevalent. There are only 3 units of which one has stopped production. The reasons discouraging the growth of grain based distilleries was primarily financial. The capital investment in grain based distilleries was higher than those for molasses based distilleries. The input costs, including raw material, fuel processing etc. were higher, with the result that the ultimate cost per litre of grain alcohol was around Rs. 6-7 litre higher than the price of alcohol produced from molasses. There was thus no motivation, benefit or incentive to opt for grain based alcohol. Grain based alcohol could not be sold for less than Rs. 26/- per litre. On the other hand Alcohol from molasses was available at Rs. 20 to 22 per ltrs. There was thus no motivation, benefit or incentive. It was noted that there was substantial production of rain fed grain crops like Jowar, maka, bajra in the State, which could, be easily diverted for production of alcohol, thereby creating value added products. This however, required that some incentive scheme be introduced . If so done, the disparity in prices would be reduced and/or thus would provide the necessary impetus to persons to invest in grain based distilleries/integrated units. The trend the world over is to use only grain alcohol for production of liquor. Manufacturers of liquor in Maharashtra wanting to export their products overseas would have to use grain alcohol alongwith international standards for maturation etc. 17 as the liquor produced from molasses alcohol is not acceptable in the world market. There was also strong social and/or development benefit by encouraging grain based alcohol plants. Farmers in rain fed areas, particularly in Marathwada and Vidarbha produced substantial quantities of rain fed Jowar, makka, bajra. These areas had no irrigation facilities and/or networks and were dependent on rainfall for their crops. Many times due to vagaries of nature, these crops got damaged and as a consequence their produce became unfit for human consumption. As a result, farmers as such were required to sell their produce at comparatively lower rates causing losses. This made their problems even more acute since the purchase price of such crops eg. Jowar and bajra was low. If therefore, a scheme of granting incentive for conversion of these grains into value added products was introduced, it would achieve multiple objectives ensuring a market and better prices for their produce, providing support to farmers, foster development in backward/less developed areas, reducing irrigated water dependence, reducing depletion of ground water, helping the environment, providing more than one source/option/raw material and at the same time enable the State to tide over the deficit situation obtaining in respect of alcohol availability etc. 13. The affidavit state that the State has noted that the States of U.P. And Punjab had introduced the scheme of granting incentives to non cane based units (molasses). The schemes of these states were specifically targeted for setting up of integrated units upto a particular capital investment. Excise related incentives were offered as a percentage of such fixed investment. This policy while facilitating new 18 units coming up in selected areas or even through out the State, did not help the existing units operating in potable sector in the State, because no incentives were available to them to purchase the grain based alcohol produced by such new units. Bearing this and other factors in mind, the policy decision was taken and scheme was introduced. The objectives of the scheme are set out in the affidavit. The objectives of the scheme are as set out below:- (i) To ensure that farmers got a market and better prices for their produce throughout the year at as profitable price. (ii) To encourage new plants which may be set up to switch over to grain alcohol. (iii)Removing the mismatch between the supply demand situation and ensuring that molasses alcohol could be made available for Industry/Fuel Ethanol. (iv)To foster general economic growth in rain fed areas where grains like makka, jowar,bajra were produced, many of which were backward and/or had no access to a good irrigation network. (v) Granting of incentives to the distilleries directly by lowering of the Excise Tariff rather than routing through liquor bottlers. (vi) Grant of incentives to new grain based distilleries/integrated units directly and the same be related to capital investment. 19 Restricting the incentive to supply of grain alcohol to potable and M&TP sector and only if the grains were purchased from within the State of Maharashtra.” 14. Salient features of the scheme:The salient features of the scheme are as set out below: i. Eligibility – All grain based distilleries which were set up and became operational till end of 2009 shall be eligible. ii. The duration of the scheme would be 5 years and would end in 2013. iii. The units, as far as possible would start production within two years from the date of granting L.O.I. In deserving cases, extension from time to time could be considered by the Commissioner Excise, depending upon the progress of the project. iv. Units who had already got L.O.I.s. could shift to the specified D & D+ areas as may be notified by the Government and set up their units. v. All new distilleries set up in industrially backward areas classified as (i) D class and (ii) D+ class of 20 Bodhidharma and Marathoner would get financial incentive to the extent of (i) 150% of the fixed capital investment or Rs. 37.50/- cores whichever being less. And (ii) in D+ class @ 200% of fixed capital investment or Rs.50 cores whichever being less. As regards industrially backward areas in the rest of the State, excluding Bodhidharma and Marathoner areas, it would be to the tune of 100% of fixed capital investment or Rs. 25/- cores whichever is