C.W.P. No. 1401 of 2008 -1- In the High Court of Punjab and Haryana at Chandigarh C.W.P. No. 1401 of 2008 Date of decision:January 30, 2008 Rana Ranjit Singh ---Petitioner Vs. Union of India and others ---Respondents Coram: HON'BLE MR. JUSTICE M.M.KUMAR HON'BLE MR. JUSTICE T.P.S.MANN Present: Mr.Rohit Sharma, Advocate, for the petitioner. *** M.M.KUMAR. J. The petitioner is keen to establish a sugar mill. He applied for Industrial Entrepreneur Memorandum (for brevity 'the IEM') along with his associates for setting up of a sugar mill and they were granted the same. It is claimed that the petitioner and his associates are the only entrepreneurs entitled to set up a sugar mill within 15 Km. radius of village Kalanaur, District Gurdaspur (Punjab). However, the IEM granted to the petitioner has been de-recognised by impugned order dated 1.11.2007 (P-5) passed by the Chief Director (Sugar) -Respondent No. 2. The principle reason for de- recognition of the IEM is that the petitioner should have taken all the four steps within a period of two years of filing of the IEM as per the provisions of Explanation 4 to Clause 6A which have been interpreted by Hon'ble the Supreme Court in the case of M/s Ojas Industries Private Limited v. M/s Oudh Sugar Mills Limited & others (P-3). It is admitted position that the Central Government amended the Sugarcane (Control) Order, 1966 (for C.W.P. No. 1401 of 2008 -2- brevity 'the Control Order) vide notification dated 10.11.2006 incorporating new Clauses 6A to 6E. In the case of M/s Ojas Industries Private Limited (Supra), Hon'ble the Supreme Court has concluded that the aforementioned amendment is retrospective in its effect and that it imposes a bar on the subsequent IEM holders in the matter of setting up of new sugar mills during the stipulated period given to an earlier holder of IEM in order to enable him to take effective steps enumerated in Explanation 4 to Clause 6A of the Control Order amended on 10.11.2006. It is admitted position that Explanation appended to Clause 6A envisages various effective steps which required to be taken by the IEM holder. Clause 6A along with Explanation 4 is set out below to appreciate the controversy:- 6A 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 4. The effective steps shall mean the following steps taken by the concerned person to C.W.P. No. 1401 of 2008 -3- 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.” In pursuance to the aforementioned provision and judgment of the Hon'ble Supreme Court in the case of M/s Ojas Industries Private Limited (Supra) , a situation arose before respondent No. 2 whereby the petitioner as well as respondent No. 3 submitted bank guarantee of Rupee One Crore for implementation of their respective 'IEM'. It is appropriate to mention that respondent No. 3 was granted 'IEM' on 29.8.2006 for setting up a sugar factory at the same location i.e. Village Kalanaur, District Gurdaspur which has been duly communicated by the department of Industrial Policy and Promotions. The 'IEM' is in fact in the name of Sh. Jaspal Singh Kandhari which was amended on 19.1.2007 and the name C.W.P. No. 1401 of 2008 -4- of respondent No. 3 i.e. M/s Crystal Energy and Foods Limited was incorporated. The petitioner and respondent No. 3 were advised vide letter dated 18.4.2007 to submit their respective affidavits indicating the effective steps taken by them as on 10.11.2006 in the prescribed proforma (as on the date of issuance of notification). Both the parties were given personal hearing also and they submitted their written arguments. It is pertinent to notice the effective steps in terms of Explanation 4 to Clause 6A taken by both the parties, which has been juxtaposed in a table which are as under:- (i)Purchase of required land in the name of the factory Name of the Party Land required for setting up of sugar factory (in acres) Details of land purchased in favour of sugar factory Remarks Land Purchased (in acres) Date of purchase Date of mutation Date of approval by the competent authority for use of land for industrial purposes. 1. 2. 3. 4. 5. 6. 7. M/s Rana Sugars Ltd. 45 acres Nil Nil Nil Nil Land identified and purchase c...land in process. M/s Crystal energy and Foods Ltd. Nil Nil Nil Nil Nil Village Panchayat of Kalanaur has given consent to the allocation of common land of 200 acres. C.W.P. No. 1401 of 2008 -5- (ii)Purchase of plant and machinery Name of the party Details of plant & machinery required. Name of the suppliers on whom orders have been placed Estimated cost of plant and machiner y. Advance/ Final amount paid to supplier. Cheque/ Draft No. & date Expected date of delivery. Date by which installation of plant & machinery has been completed/ is likely to be completed. 1. 2. 3. 4. 5. 6. 7. 8. M/s Rana Sugars Ltd. 85 T air cooled crystallizer and 85 vacuum crystalizer M/s Jassal Heavy Engg. Works Ludhiana. Rs.72.30 lacs. Rs.10.00 lacs. Ch.No.64 0413 dt. 24-08- 2006. 29-01- 2008 05-02-2009 01 set Heavy Duty Cane Leveller M/s Three Star Engg. Works Ltd. Ghaziabad. Rs.10.00 lacs. Rs.11.60 lacs Ch. No.21568 6 dt.29- 09-2006 08-02- 2008 14-02-2009 01 set Heavy Duty Swing Type Fibriolrer -do- Rs.48.00 lacs. 02-02- 2008 08-02-2009 Various Tanks for conveyors, decorator tank -do- Rs.18.75 lacs. Rs.3.75 lacs. Ch.No.29 3599 dt.27-12- 06 13-02- 2008 18-02-2009 32 TPH Boiler M/s Cheema Boilers Ltd. Mohali Rs.5.39 crores Nil Nil Nil Nil Slip motors M/s Amtek Sales and Services. Rs.66.60 lacs. Rs.20.00 lacs. Ch.No.82 5550 dt.14-10- 2006 18-02- 2008 24-02-2009 4000 KVA Transforme r -do- Rs.24.25 lacs. 07-02- 2008 11-02-2009 1500 Square Mtr. Evaporator M/s Kay Bouvet Engg. Ltd. Rs.21.85 lacs Rs.5.00 lacs Fund Transferr ed from A/C No.10241 996071 dated 15- 11-2006 31-01- 2006 04-02- 2009. C.W.P. No. 1401 of 2008 -6- Name of the party Details of plant & machinery required. Name of the suppliers on whom orders have been placed Estimated cost of plant and machiner y. Advance/ Final amount paid to supplier. Cheque/ Draft No. & date Expected date of delivery. Date by which installation of plant & machinery has been completed/ is likely to be completed. 3x80T vacuum pan -do- Rs.100.00 lacs. Rs.10.00 lacs. Fund Transferr ed from CA A/C No.30064 5208 dated 08- 08-2006 20-02- 2008 23-02-2009 Semi Kestner of 2500 Mtr. Heating Surface -do- Rs.30.87 lacs. Rs.15.00 lacs. Fund Transferr ed from A/c No.10241 996071 dated 15- 11-2006 19-02- 2008 25-02-2009 30” x 60” milling tandem complete with accessories -do- Rs.990.00 lacs. Rs.105.00 lacs Fund Transferr ed from A/c No.10241 996071 dated 28- 08-2006 08-02- 2008 12-02-2009 30” x 60” milling tandem complete with accessories -do- Not indicted Rs.51.89 lacs. Fund Transferr ed from A/c No.10241 996071 dated 28- 08-2006 08-02- 2008 12-02-2009 30” x 60” milling tandem complete with accessories -do- Not indicted Rs.50.00 Ch. No.21568 9 dt. 29- 09-2006 08-02- 2008 12-02-2009 C.W.P. No. 1401 of 2008 -7- Name of the party Details of plant & machinery required. Name of the suppliers on whom orders have been placed Estimated cost of plant and machiner y. Advance/ Final amount paid to supplier. Cheque/ Draft No. & date Expected date of delivery. Date by which installation of plant & machinery has been completed/ is likely to be completed. 30” x 60” milling tandem complete with accessories. -do- Not indicted 42.00 Fund Transferr ed from A/c No.10241 996071 dated 28- 08-2006 08-02- 2008 12-02-2009 30” x 60” milling tandem complete with accessories -do- Not indicted 260.09 Fund Transferr ed from CA A/C No.30064 520896 dated 08- 08-2006 08-02- 2008 12-02-2009 M/s Crystal Energy Foods Ltd. Nil Nil Nil Nil Nil Nil Nil iii Commencement of civil works and construction of the building a. Approval of the plan Name of the Party Whether the plan for construction of sugar factory has been prepared by the Architect. The Name and address of the Architect. Advance/final amount paid Cheque & draft No. and date. Remarks 1. 2. 3. 4. 5. M/s Rana Sugars Ltd. Civil Work yet to start Nil Nil The same would be done after the required land is purchased. M/s Crystal Energy and Foods Ltd. Nil Nil Nil - C.W.P. No. 1401 of 2008 -8- b. Civil work and construction of building Name of the Party Name of the contractor Date of agreement with the contractor. Advance/final amount paid cheque/draft no. and date Date by which civil work has been completed/i s likely to be completed. Remarks. 1. 2. 3. 4. 5. 6. M/s Rana Sugars Ltd. Civil work yet to start Nil Nil Nil The same would be done after the required land is purchased. M/s Crystal Energy and Foods Ltd. Nil Nil Nil Nil - iv Sanction of requisite term loans from banks or financial institutions Name of the party Name of the banks/ financial institutions. Date of submission of application to banks/finan cial institutions for term loans. Amount applied for Amount sanctioned. Letter No. and date of sanction letter. Remarks 1. 2. 3. 4. 5. 6. 7. /s Rana Sugars Ltd. Nil Nil Nil Nil Nil Promoters have enough sources of their own. M/s Crystal Energy and Foods Ltd. Nil Nil Nil Nil Nil - Respondent No. 2 has concluded that the petitioner had taken only one effective step namely placing of order for plant and machinery whereas respondent No. 3 has not taken any single step. On the basis of the C.W.P. No. 1401 of 2008 -9- opinion expressed by the Additional Solicitor General and the judgment of Hon'ble the Supreme Court in the case of M/s Ojas Industries Private Limited (Supra) it has been concluded that IEM holder is required to take all the four effective steps as per provisions of Explanation 4 to Clause 6A of the Control (Amendment) Order, 2006 within a period of two years of filing of the IEM in terms of Clause 6C of the Control(Amendment) Order. As the petitioner has taken only one step within the period of two years of filing of the IEM, as per the law declared by Hon'ble the Supreme Court, the IEM of the petitioner was liable to be de-recognised. Accordingly, their bank guarantee of Rs. One Crore was not accepted and the same was returned. On account of the fact that respondent No. 3 was granted IEM on 29.8.2006 and period of two years is to expire in August, 2008, they have been advised to submit distance certificate from the Cane Commissioner, Punjab, certifying that the distance as measured by the Survey of India between the site of their sugar factory and adjacent sugar factories was not less than the minimum distance as prescribed by the Central or the State Government for setting up a sugar factory at village Kalanaur, District Gurdaspur. The necessary action regarding the acceptance of bank guarantee and considering them as a new sugar factory on records of the Directorate of Sugar is to be taken only thereafter. We have heard learned counsel for the petitioner at a considerable length and find that there is no merit in this petition. It is evident from the reading of Clause 6C that the stipulated period for taking effective steps is of two years and the commercial production is to commence within four years with effect from the date of filing the IEM with the Central Government. Clause 6C of the Control Order reads thus:- C.W.P. No. 1401 of 2008 -10- “6C 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, for implementing the Industrial Entrepreneur Memorandum and commencement of commercial production thereof.” A perusal of the aforesaid provision shows that all effective steps within the meaning of Explanation 4 to Clause 6A have to be taken within a period of two years. It is undisputed that the petitioner has neither purchased the required land in the name of the factory as envisaged by Explanation 4(A). In the absence of purchase of land there is no cause of commencement of construction work nor there is any sanction of requisite term loan from the bank or financial institution. The only step taken by the petitioner is that it has placed order for installation of plant and machinery C.W.P. No. 1401 of 2008 -11- which is likely to be completed in February, 2009 as is evident from table No. 2. However, the work is not commenced as it is to commence only after the purchase of land which is stated to have been identified. With regard to financial arrangements in the shape of term loan from the financial institution it has been represented that the promoters have enough sources of their own which at best could be considered the second steps. Therefore, it is obvious that all effective steps within the meaning of Explanation 4 to Clause 6A have not been taken by the petitioner. Accordingly, we find no merit in the petition. The argument of the learned counsel for the petitioner that only two steps should be considered enough to satisfy the requirement of Explanation 4 to Clause 6A has not impressed us because firstly, Clause 6A of Explanation 4 itself is absolutely clear and does not leave any room to doubt. Secondly, the observations made by Hon'ble the Supreme Court also support the aforementioned conclusion. As a sequel to the above discussion, we do not find any merit in the petition and the same is dismissed. (M.M.KUMAR) JUDGE (T.P.S.MANN) JUDGE January 30, 2008 paramjit