STATE OF UTTAR PRADESH & OTHERS  versus MAWANA SUGARS LIMITED
[2017] 10 S.C.R. 1097, Supreme Court of India, 2017
Outcome: Appeal(s) allowed (Granted)
Segment: Ratio
[2017] 10 S.C.R. 1097 
STATE OF UTTAR PRADESH & OTHERS 
MAWANA SUGARS LIMITED 
(Civil Appeal No. 10610 of 2017) 
AUGUST 18, 2017 
[ARUN MISHRA AND AMITAVA ROY, JJ.] 
A 
B 
Excise - Molasses Policy - Interpretation of - State 
Government, for the Molasses Year 2015-2016 issued "Molasses 
Policy'', which provided for a reser11ation of 25% of the molasses 
C 
produced to be supplied to the country liquor manufacturers as per 
the formula mentioned therein - According to the respondent, the 
reservation of 25% would apply to the balance of molasses left 
over after its captive consumption for its distillery - Whereas, 
appellallts asserted that the reservation of 25% would be on the 
total production of 11wlasses, to be adjusted el'entually on the basis D 
of the balance stock computable in terms of the formula defined in 
the Policy - Held: In the Policy for the Molasses Year 2015-16, 
mandate is for 25% reservation of the total molasses produced -
Unambiguous prescript of the Policy that the reservation would be. 
of 25% of the molasses produced, which by no means, can be 
E 
construed to connote that such reservation had been contemplated 
to be only of the balance stock left over after the captive 
consumption of the sugar mill(s) concerned - Noticeably, the Policy 
co11sciously underlines that in any event thereby, the captive 
consumption of molasses by the sugar mills is not affected at all, so 
much so that if the balance stock is more than the extent of F 
reservation,
the whole of it would apply, but if the balance stock is 
less than the quantity to be reserved, the reservation would work 
only to the extent of the balance stock and not in excess - Therefore, 
the plea of the respondent that the reservation is unmistakably limited 
to 25% of the balance stock under all situations is visibly flawed 
G 
and fallacious. 
Allowing the appeal, the Court 
HELD: 1.1 It would be apparent from the Molasses Policy . 
2015-16 that for the Molasses Year 2015-16, every sugar mill, at 
the first place, would have to keep 25% of the molasses produced, H 
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[2017] 10 S.C.R. 
A 
reserved and those sugar mills, whose distilleries are situated in 
the State, would apply the following norms of reservation: 
B 
c 
D 
(a) If the balance stuck exceeds the reserved quantity (25%), 
then in that case, full reservation would a11ply to them w.e.f. the 
commencement of the molasses year. 
(b) In case the balance stuck is less than the reserved c1uantity 
then, reservation would apply w.e.f'. the commencement of the 
molasses year, but would be limited to the c1uantity of' balance 
stock. 
(c) If the balance stock is nil i.e if the captive consumption of 
molasses exceeds the c1uantity available to them, no reservation 
would apply. [Para 21] [1109-E-H] 
1.2 The Policy determined the balance stock as hereunder: 
Balance stock fur the Molasses Year 2015-16 = unreserved 
preliminary stock of the group of mills in the Molasses Year 2015-
16 + production in the Molasses Year 2015-16 - self-consumption 
of molasses in the Molasses Year 2015-16 (equivalent of self-
consumption of molasses up to 31.10.2015 in the Molasses Year 
2014-15). [Para 24] [1110-D] 
1.3 The balance stock for the purpose of the Policy, 
E 
therefore, in essence, is the stock that would be left over after 
utilization of the commodity for captive consumption in the 
Molasses Year 2015-16 from the sum total of the unreserved 
preliminary produce of the same molasses year and the production 
thereof in the said year. The computation of balance
stock though 
F 
relevant to eventually decide as to the extent of reservation that 
would be effective to ascertain the volume of supply to other 
distilleries manufacturing country-made liquor, it however does 
not in any way support the contention of the respondent that 
irrespective of the eventualities in the aforementioned clauses 
(a), (b) and (c), the reservation would be of 25% only of such 
G balance stock and not otherwise. This is in view of the 
unambiguous prescript of the Policy that the reservation would 
be of 25% of the molasses produced, which by no means, can be 
construed to connote that such reservation had been 
contemplated to be only of the balance stock left over after the 
H captive consumption of the sugar mill(s) concerned. Such a
STATE OF UTTAR PRADESH & OTHERS v. MAWANA 
1099 
SUGARS LIMITED 
construction would be a total misreading of the Policy and would 
A 
border on perversity. [Para 25) [1110-E-H] 
2. Noticeably, the Policy in question consciously underlines 
that in any event thereby, the captive consumption of molasses 
by the sugar mills is not affected at all, so much so that if the 
balance stock is more than the extent of reservation, the whole 
B 
of it would apply, but if the balance stock is less than the c1uantity 
to be reserved, the reservation would work only to the extent of 
the balance stock and not in excess thereof. As theJlalance stock, 
if any, conceptually would be the residue afte1· the utilization by 
way of captive consumption, in absence of the challenge to the 
C 
Policy to be illegal, unfair, unjust, unreasonable or 
unconstitutional, the plea of the respondent that the reservatiori-
is unmistakably limited to 25% of the balance stock under all 
situations is visibly flawed and fallacious. The measure of the 
captive consumption for the Molasses Year 2015-16, on the basis 
of such utilization for the Molasses Year 2014-15, in absence of D 
any overwhelming material to the contrary, also cannot be faulted 
with. [Para 28) [1112-A-D] 
Dlwmpur Sugar Mills Ltd. v. State of U.P. and others 
(2007) 8 sec 338 : c20011 10 SCR 245 - held 
inapplicable. 
E 
SIEL Limited v. Union of India (1998) 7 SCC 26 : [1998) 
1 Suppl. SCR 560 - referred to. 
Case Law Reference 
[2007] 10
SCR 245 
[1998] 1 Suppl. SCR 560 
held inapplicable Para 6 
referred to 
Para 18 
CIVIL APPELLATE JURISDICTION: Civil Appeal No.10610 
of2017. 
From the Judgment and final Order dated 07-10-2016 passed 
F 
by the High Court of Judicature at Allahabad in Writ (C) No.40567 of G 
2016. 
Dinesh Dwivedi, Ms. lndu Malhotra, Sr. Ad vs., Mr. Ardhendumauli 
Kumar Prasad, Ms.Nalin Kohli, Prasanjit Keshwani, Ankit Roy, V. D. 
Khanna, Sumit Goel, Ms. Sona! Gupta, P. K. Bhalla, Praveen Kumar, 
Ms. Babita Sant, Tanvir Nayar, Ad vs. for the appearing parties. 
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(2017] 10 S.C.R. 
The Judgment of the Court was delivered by . 
AMITAVA ROY, J. I. Leave granted. 
2. The State ofUttar Pradesh along with its functionaries of the 
Department of Excise are in appeal against the judgment and order dated 
07.10.2016 rendered by the High Court of Judicature at Allahabad, 
thereby in essence directing the appellants to allow the respondent to 
retain 25% of the balance stock of molasses, after utilization for its captive 
consumption, for supply to the distilleries manufacturing liquor for the 
Molasses Year2015-16. The respondent was also left at liberty to move 
the appropriate authority in the event of its requirement for further quantity 
of molasses for its captive consumption during the said Molasses Year. 
The appellants repudiate this determination and the above directions to 
be opposed to and militative of the policy for the Molasses Year 2015-16. 
3. We have heard Mr. Dinesh Dwivedi, learned senior counsel 
for the appellants and Ms. Indu Malhotra, learned senior counsel for the 
D respondent. 
4. The pleaded facts in brief, sans the inessentials· need be 
adverted to forthe required grip of the issues. The respondent company 
has three sugar mills in the name and style of "Mawana Sugar Work.s, 
Maw an a, Distt. Meerut," "N anglamnal Sugar Complex, Nanglamal, Distt. 
E Meerut and 'Titawi Sugar Complex, Titiwi, Distt. Muzaffarnagar" which 
are engaged in the manufacture of crystal sugar through
vacuum pan 
process and produce molasses as a by-product. Admittedly the storage, 
sale, supply and distribution of molasses within the State of U.P. is 
governed by the Uttar Pradesh Sheera Niyantran Adhiniyam, 1964 (for 
short, hereinafter to be referred to as "the Act"), whereunder in terms 
F of Section 8, the Controller of Molasses, with the prior approval of the 
State Government, is empowered to issue order to a sugar mill for transfer 
or sale or supply in the prescribed manner, such quantity of molasses to 
such persons, as may be specified therein. It is a matter of record that 
every year, the State Government issues·"Molasses Policy", whereby it 
G prescribes the mode and manner in which the molasses produced by the 
sugar mills would be dealt with. The policy invariably provides for 
reservation of ·certain portion of the molasses produced by the sugar 
mills for sale and supply to the country liquor manufacturers. 
5. The State Government, forthe Molasses Year2015-l 6, vide its 
H communication No. 39/201611501/E-2/13-2016-74/2015 dated 24.6.2016
STATE OF UTIAR PRADESH & OTHERS v. MAWANA 
1101 
SUGARS LIMITED [AMITAVA ROY, J.] 
issued the "Molasses Policy" (for short also "Policy") for the said year. 
A 
The Policy provided for a reservation of25% of the molasses produced 
to be supplied to the country liquor manufacturers as per the formula 
mentioned therein. 
· 6. The parties are at issue on the interpretation of the above 
Policy. Whereas, according to the respondent, the reservation of 25% · B 
would apply to the balance stock of molasses left over after its captive 
consumption for its distillery, as propounded in Dhampllr Sugar Mills 
Ltd. vs. State of U.P. a11d otlzers1 , the assertio.n of the appellants herein 
is that having regard to the content and purport of the Policy, the 
reservation of 25% would be on the total production of molasses; to be 
adjusted eventually on the basis of the balance stock computable in 
C 
terms of the formula defined in the Policy. 
7. The pleaded case of the respondent is that the entire 
requirement of molasses for operating its distillery is met from the stock 
produced in its sugar mills and that dealing with previous Molasses Year 
2015-I 6, the balance stock of molasses left over after such captive D 
consumption was made available for supply to the· country liquor 
manufacturers in terms of the Policy for that year. 
8. According to it, in the Molasses Year 2015-16, the productiori 
of molasses has been much less for various reasons and though it had 
consumed a portion
of the stock for its captive consumption in its 
E 
distilleries till 6.6.2016, when the operations had to be suspended due to·· 
rain, it was anticipated that the whole 'of the remaining stock \vould be 
utilised in its distilleries (tnd no baiance stock would be left for ~es~rvation 
or supply to the country-made Iiq~or.inanufacturers. Though stating the 
above in details, it had made a representation on 5.7.2016 before the 
Controller of Molasses highlighting that the entire stock of m9lasses 
produced during the Molasses Year 2015-16 would be unavoidably utilised· 
for its captive consumption in its distillery, the said authority by the order 
dated 27.7.2016 without recording any reason has directed compliance 
of the Policy for the Molasses Year 2015-16, and thereby for all practical 
purposes has rejected the request made. 
9. The appellants in their pleadings in reply, while endorsing the 
Policy for the year 2015-16 and the reservation of25% of the molasses 
produced during that year, did illter alia underline as well that in terms 
of the Act, the State Government was authorised and empowered to 
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G 
1 c2001J s sec 33.8 
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[2017] 10 S.C.R. 
A direct/regulate, control, storage. supply, gradation of price of molasses. 
B 
It was elaborated that the aim and object of the fixation of reservation 
and to maintain the exist ratio of molasses was to ensure proper availability 
of the commodity for the country liquor distilleries each month so that 
the revenue earned by the State from country liquor was not adversely 
affected for the financial year 2016-17. It underlined that the Minimum 
Guarantee Quantity of country liquor in the financial year 2016-17 was 
about 32.02 crore bulk liter by which a revenue of Rs. 8037.42 crores 
was likely to be generated and for that purpose, the estimated requirement 
of molasses was 52 lakhs quintal. That supply of quality molasses of the 
above amount was uncompromisingly essential to make available to the 
C public, safe and potable country liquor at an appropriate price, so as to 
guard against consumption of spurious stuff manufactured illegally and 
prevent fatal accidents and injuries to public health, has been emphasized. 
The appellants thus, sought to flag that the regulatory regime for 
reservation of molasses for production of country liquor was not only to 
D generate revenue for the State Government but was also comprehended 
in the interest of public life, health and safety. It was highlighted as well 
that in absence of reservation of molasses, the sugar mills would be at 
Iibe1ty to hold the stock thereof in order to
earn high profit at the end of 
the year or to convert it into free sale stock which would dislocate the 
E 
F 
supply to the country liquor manufacture distilleries, thus adversely 
affecting the availability of the safe and quality country liquor for the 
general pubic. After referring to the statistics pertaining to the respondent 
company with regard, amongst others to its opening balance, production 
and captive consumption over a period of four years from 2012-13 to 
2015-16, the appellants endeavoured to demonstrate that in all these 
years, the respondent company had been left with surplus stock/balance 
stock after utilising the rest for its captive consumption. Due reference 
was made as well of the Policy and in particular of the computation of 
balance stock to conclude that the impugned action was unassailable. 
10. The High Court, as the impugned judgment would attest, 
premised its determination, chiefly on the decision of this Court in 
G Dhampur Sugar Mills', which, as would unfold hereinafter, was founded 
on the policy distinctly different from one, formulated for the Molasses 
Year 2015-16. Be that as it may, according to the High Court, the Policy 
was based on the directions given by this Court in the above 
pronouncement. It found fault with the impugned order dated 27. 7 .2016 
H requiring compliance by the respondent of the Policy, as devoid ofreasons.
STATE OF UTTAR PRADESH & OTHERS v. MAWANA 
1103 
SUGARS LIMITED [AMITAVA ROY, J.] 
It perceived the stand of the appellants, to be that the entire excess 
A 
stock had to be reserved by the respondent for supply to the distilleries 
manufacturing liquor, without however referring to in particular the 
concept of balance stock, as explained in the Policy and held, in terms 
of the decision in l)hampur Sugar Mills1, that the respondent was 
required to reserve 25% only of the excess stock left over after its 
B 
captive consumption. It noted the figures representing the opening stock, 
production of molasses and the captive consumption thereof for the 
Molasses Year 2015-16, which was based on the actual consumption in 
the previous Molasses Year 2014-15 and calculated the balance stock 
for the Molasses Year 2015-16 to be 15,994 M.T. and held that the 
respondent would be required to reserve 25% thereof only for supply to 
C 
the distilleries, manufacturing country liquor. The contention of the 
respondent that it may be allowed to consume the entire stock of molasses 
was rejected and in absence of particulars furnished by it, accepted its 
captive consumption to be as in the Molasses Year 2014-15. Accordingly, 
the respondent was required to retain 25% of its balance stock, after its 
D 
captive consumption, to be reserved for supply to the distilleries 
manufacturer country liquor as per the Policy. To reiterate, the appellant 
was also granted the liberty to offer to the
authorities concerned, in 
case, it required further quantity of molasses for its captive consumption 
during the Molasses Year 2015-16. 
11. Mr. Dinesh Dwivedi, learned senior counsel for the appellants 
E 
has emphatically asserted that the impugned judgment proceeds on an 
erroneous reading of the decision rendered by this Court in Dhampur 
Sugar Mills1 and a patently wrong interpretation of the PoliCy and is 
thus, clearly unsustainable in law and on facts. The learned senior counsel 
maintained that the policy analysed and adverted to by this Court in 
F 
Dhampur Sugar Mills 1 was distinctly different in its text and tenor 
from the Policy in question, for which no analogy therefrom was possible. 
According to him, the Policy, though at places, has reference of the 
observations in Dhampur Sugar Mills 1, it stands on its own strength 
and if correctly interpreted, would squarely defeat the asse1tions of the 
G 
respondent and the findings recorded in the impugned judgment. The 
decision given in Dhampur Sugar Mills1 has no decisive bearing at all 
on the Poli~y and thus, the starting premise of the impugned judgment is 
patently flawed, rendering it indefensible, he urged. Apart from reiterating 
the underlying objectives of the Policy in espousal of public interest as 
pleaded, Mr. Dwivedi, referring to the concept of balance stock, as 
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explicated in the Policy, insisted that a manufacturer of molasses. was at 
the outset, obligatorily required to keep apart 25% of its total production 
in the Molasses Year 2015-2016, to be adjusted, eventually subject to its 
captive consumption for its distillery and in the face of such unequivocal 
mandate thereof, any interpretation either contrary thereto or in 
unwarranted moderation thereof, is untenable in law. 
12. Ms. Indu Malhotra, learned senior counsel for the respondent 
in confutation of the above, argued that the elucidation of the policy 
offered by the High Court, based on the enunciation in Dhampur Sugar 
Mills' is unimpeachable. According to her, the interpretation of the Policy, 
as extended by the appellants, besides being utterly wrong, if accepted, 
would amongst others leave the respondent at the end of Molasses Year 
2015-16, without any stock whatsoever of molasses to embark upon its 
manufacturing process for the next year, which is inconceivable. She 
has urged that the profuse reference of the decision in Dhampur Sugar 
Mills' in the Policy makes it abundantly clear that the exposition of the 
D policy, as made therein, was consciously made applicable to the Policy 
involved and thus the respondent at the most in terms thereof was required 
to reserve only 25% of the stock of molasses left in balance after its 
captive consumption to the fullest extent. 
13. The disparate pleadings and the
contrasting assertions have . 
E received our due consideration. As a plain reading of the impugned 
judgment would testify, that it is substantially structured on the rendering 
in Dhampur Sugar Mills1, apt it would be at the outset to advert thereto, 
so as· to clear the deck for the ultimate adjudication. 
14. The parties are not at issue that the Act has installed a legal 
F 
regime whereunder the State Government may issue necessary orders/ 
directions for control, storage, st1pply, gradation and prices of molasses 
and that the.Policy and the orders impugned do not suffer from aoy lack 
of authority. To reiterate, neither the validity of the Act. nor that of the 
Policy has been assailed and hence, the instant exercise is limited to the 
dissension on the interpretation of the Policy in its application to the 
G respondent and other sugar mills equally situated. To address the issue 
and having regard to the pre-supposition on which the impugned judgment 
has been passed, it would be expedient to note in seriatim, the rendition 
in Dllampur Sugar Mills1 and the relevant portions of'the Policy 
2015-2016. 
H
STATE OF UTTAR PRADESH & OTHERS v. MAWANA 
1105 
SUGARS LIMITED [AMITAVA ROY, J.] 
15. In Dhampur Sugar Mills1, the assailment pertained to an 
A 
order of the State ofU.P. directing the appellant under the Uttar Pradesh 
Sheera Niyantran Adhiniyam, 1964 (abbreviated as "the Act") to supply 
20% of the molasses produced by its sugar mills for manufacturing 
"country-made liquor" by distilleries for the financial years 2003-04 and 
2004-05 as well as the consequential show cause notices for prosecution, 
B 
as upheld by the jurisdictional High Court. The appellant did have a 
sugar mill in the State together with a distillery which manufactured 
ethyl alcohol, used for blending of petrol, manufacture of chemicals and 
rectified spirit for medicines. It also had similar business at other places. 
The main contention of the appellant was that though it was producing 
molasses, the entire production was required by it for captive consumption 
C 
and even that was not sufficient for which it, with the permission of 
government, had been importing the commodity from other states as 
well as from other countries. It therefore reasoned that as it was left 
with no balance or extra stock of molasses for supply to the distilleries 
manufacturing country-made liquor, the authorities could not compel it 
D 
to supply molasses vide the impugned orders and repudiated the impugned 
action to be illegal, arbitrary and unreasonable and also being violative 
of Articles 14 and 19(1 )(g) of
the Constitution. 
16. In refutation, the plea of the government was that in 
accordance with the provisions of the Act, it was open to the authorities 
to ask the appellant to supply 20% ·molasses for the purpose of E 
manufacturing country-made liquor and thus the impugned orders were 
perfectly in accord with the mandate of the enactment and by no means 
could be termed as illegal and unlawful. The High Court, to reiterate, 
held that the reservation for 20% of molasses and the directions issued 
to the appellant to supply such stock for manufacturing country-made 
F 
· liquor were neither contrary to law nor against public policy and thus 
rejected the impugnment of the appellant. 
17. Before this Court, it was principally canvassed that the 
impugned order(s) were expressly clear and required a sugar mill to 
res~rve 20% of the molasses from the balance stock i.e. the left over 
G 
after .the actual consumption by the industry, for manufacturing country 
liquor and as the appellant did not have such balance stock of molasses, 
even for 
its captive consumption and had to import molasses from 
other states in the country and abroad, it could not be compelled to reserve 
20% molasses for manufacturing country liquor by other distilleries. 
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18. This Court, while noticing that the constitutional validity of the 
Act had not been challenged, the same having been upheld earlier in 
SlEL Limited vs. Union of lndia1 wherein the statute was held to be 
within the legislative competence of the State and also not inconsistent 
with the Industries (Development and Regulation) Act 1951, noted further 
clause (3) of the order 9 .6.2004 relied upon by the High Court to partially 
uphold the challenge. The, original text of the order impugned being in 
Hindi, the translation thereof, as referred to in the judgment, is extracted 
herein below: 
"25. The English translation supplied by the appellant atAnnexure 
P-3 reads thus: 
"From the balance stock of molasses with each sugar mill. 20°;., 
of molasses shall be reserved for the distilleries manufacturing 
country liquor. The sugar mills having their own distilleries shall 
not be covered within this reservation to the extent that after the 
actual consumption of molasses in their captive distillery, 20% 
reservation shall be applicable on the balance stock." 
19. Having regard to the above quoted text, this Court ruled that 
the same applied only to the excess stock of molasses, i.e., molasses 
which was in excess of and not used for captive consumption by the 
sugar factory and was thus "the balance stock" and sustained the 
assertion of the appellant to that extent. This Court minuted as well the 
plea of the
appellant that it had no excess stock of molasses and had to 
import the said commodity from other sources to meet its requirement 
for manufacturing industrial alcohol, after obtaining such permission 
granted by the Central Government as well as the State Government. 
p This Court therefore declared that the case of the appellant in the singular 
fact situation as projected, did not fall within the purview of clause (3) as 
above and, therefore, could not have been invoked by the authorities 
against it. It therefore, determined that the High Court was not right in 
holding that all sugar mills were bound to supply 20% of molasses under 
Clause (3) of the Government Order 2004 irrespective of the stock 
G possessed. The other contentions addressed being not of any significance 
for the instant adjudication are not being adverted to. Suffice it to set-out 
hereinabove the operative portion of the decision as contained in 
paragraphs 53 and 54 thereof: 
H 
2 0998)1sec26
STATE OF UTTAR PRADESH & OTHERS v. MAWANA 
1107 
SUGARS LIMITED [AMITAVA ROY, J.] 
"53. For the foregoing reasons, in our opinion, the appeal deserves 
A 
to be allowed and the order of the High Court deserves to be 
set-aside. It is. accordingly. held that the directive issued by the 
respondents would not apply in case there is no balance stock 
of molasses with any sugar mill. The respondent authorities 
have no right to compel such sugar mills to supply 20% molasses 
B 
for the purpose of manufacturing country liquor. 
54. We may, however, make one thing clear. As seen above, 
the assertion of the appellant was that it has no balance stock 
and even for its own requirement, it has to import molasses. On 
the other hand, the allegation of the respondents is that excess 
and btilance molasses was available with the appellant which it 
C 
had sold in open market. The High Court, in the impugned order 
has not decided the question finally. Quoting certain paragraphs 
from the writ petition, the High Court observed that there was 
no proper pleading and as such, the Court was not in a position 
to go into the question. It is, therefore, made clear that it is open 
D 
to the respondents to take appropriate action in accordance 
with law on the basis of our decision and observation made in 
this judgment." 
20. The records testify that the said Policy 2015-16 was published 
by a Circular/Communication No.39/2016/1501/E-2/Thirteen-2016-74/ 
E 
2015 in vernacular and a translated
copy thereof has been placed on 
records and produced in course of the arguments. As it had been attested 
on behalf of the appellants by Mr. Dwivedi ·that the document produced 
at the hearing bears the correct translated version of the original, the 
same would be referred to. The relevant excerpt therefrom is quoted 
hereinbelow: 
F 
"In this regard, I have been directed to say that suggestions/ 
proposals received from you in pursuance to the aforesaid letters 
dated 9'h November, 2015; 20'" January, 2016; 2"<lFebruary, 2016; 
2"<l April, 2016; 4"' May, 2016 and 23'<l May, 2016, were placed 
in the meetings of the Molasses Advisory Committee headed by 
G 
Chief Secretary held on 31.10.2015 and 15.03.2016 and the same 
were considered in the said meetings and in furtherance of the 
same, following Molasses Policy has been framed for the year 
2015-16: 
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(I) Every sugar mill in the molasses year 2015-16 will keep 25% 
of the molasses. produced. reserved and those sugar mills whose 
distilleries are situated in the State will aUPIY following reservation 
on the quantity of molasses produced by them in the year2015-16: 
(i) If the balance stock of the group of captive sugar mills exceeds 
reserved quantity (25%). then in that case full reservation shall 
apply to them with effect from the commencement of the 
molasses year as per directions contained in paragraph 47 of the 
Order dated 24.09.2007 passed in Civil Appeal No.4466 of2007 
titled M/s Dhampur Sugar Mills Limited Versus State of Uttar 
Pradesh and Others. Because it will not create any shortage in 
their own consumption of the molasses (in view of the quantity 
of self consumption of the molasses year 2014-15); 
(ii) Whereas in case the balance stock of the group of captive 
sugar mills is lesser than the reserved quantity. then in that case 
• reservation shall apply to them with effect from commencement 
of the molasses year and quantity of reservation shall be limited 
to the quantity of balance stock as it will not result in any shortage 
of their self-consumption (in view of the quantity of self 
consumption of the molasses year 2014-15) as per directions 
contained in paragraph 46 of the Order dated 24.09 .2007 passed 
in Civil Appeal No.4466/07- titled Mis Dhampur Sugar Mills 
Limited versus State
of Uttar Pradesh and Others. Because it 
will not create any shortage in their own consumption of the 
molasses (in view of the quantity of self consumption of the 
molasses year 2014-15); 
F 
(iii) Whereas in case the balance stock of the group of captive 
sugar mills is nil i.e. to say that their consumption of molasses 
exceeds the quantity of molasses available to them (self-
consumption based on molasses year2014-15), then in that case 
no reservation shall apply to them as per directions contained in 
paragraph 46 of the Order dated 24.09.2007 passed in Civil 
G 
Appeal No.4466/2007- titled M/s Dhampur Sugar Mills Limited 
Versus State of Uttar Pradesh and Others. 
H 
Determination of the balance stock: 
Balance stock has been elaborated by the Honorable Supreme 
Court in para 20 of its Judgment and Order dated 24.09.2007
STATE OF UTIAR PRADESH & OTHERS v. MAWANA 
1109 
SUGARS LIMITED [AMITAVA ROY, J.] 
passed in Civil Appeal No.4466/2007- titled M/s Dhampur Sugar A 
Mills Limited Versus State of Uttar Pradesh and Others, which 
reads as under -
"In our opinion, however, Clause (3) applies only to excess 
stock of molasses that is. molasses which is in excess of and 
not used for captive consumption by sugar factory and is thus 
B 
balance stock." 
Therefore, balance stock for the molasses year 2015-16 = 
unreserved preliminary stock of the group of mills in the molasses 
year 2015-16 +production in the molasses year 2015-16-self 
consumption of molasses in the molasses year 2015-16 (equivalent c 
to self-consumption of molasses up to 31.10.2015 in the molasses 
year 2014-15). 
(2). The aforesaid percentage of reservation is fixed with the 
condition that availability and necessity of molasses will be 
reviewed after every quarter and if there occurs any change D 
(for increase or decrease) in the percentage of reservation due 
to availability of molasses and necessity of country liquor, then 
State Government will take an appropriate decision regarding 
change in the reservation percentage of the molasses, after 
considering each and every fact in detail." 
21. It would be apparent from the quoted text that for the Molasses 
Year 2015-16, every sugar mill, at the first place, would have to keep 
25% of the molasses produced, reserved and those sugar mills, whose 
distilleries are situated in
the State, would apply the following norms of 
reservation: 
(a) If the balance stock exceeds the reserved quantity (25%), 
then in that case, full reservation would apply to them w.e.f. the 
commencement of the molasses year. 
E 
F 
(b) In case the balance stock is less than the reserved quantity 
then, reservation would apply w.e.f. the commencement of the 
G 
molasses year, but would be limited to the quantity of balance 
stock. 
(c) If the balance stock is nil i.e if the captive consumption of 
molasses exceeds the quantity available to them, no reservation 
would apply. 
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1110 
SUPREME COURT REPORTS 
[2017] 10 S.C.R. 
A 
22. As all the clauses would demonstrate. reference of paragraphs 
46 and 4 7 of the decision in Dlzampur Sugar Mills1 has been referred 
to, highlighting that in all the eventualities, the captive consumption of 
molasses by the sugar mills would thereby not be curtailed or prejudicially 
affected. 
B 
23. With reference to "balance stock" as well, in the decision in 
Dhampur Sugar Mills 1, following observation in paragraph 20· 
(corresponds to para 27 of the reported judgment, as above) has been 
alluded to: 
"In our opinion, however, Clause (3) applies only to excess stock 
c 
of molasses, that is, molasses which is in excess of and not used 
for captive consumption by sugar factory and is thus the balance 
stock." 
24. The Policy determined the balance stock as hereunder: 
Balance stock for the Molasses Year 2015-16 =unreserved preliminary 
D stock of the group of mills in the Molasses Year 2015-16 +production in 
the Molasses Year 2015-16 - self-consumption of molasses in the 
Molasses Year 2015-16 (equivalent of self-consumption of molasses up 
to 31.10.2015 in the Molasses Year 2014-15). 
25. Thus the balance stock forthe purpose of the Policy in essence 
E 
is the stock that would be left over after utilization of the commodity for 
captive consumption in the Molasses Year 2015-16 from the sum total of 
the unreserved preliminary produce of the same molasses year and the 
production thereof in the said year. The
computation of balance stock 
though relevant to eventually decide as to the extent of reservation that 
would be effective to ascertain the volume of supply to other distilleries 
F 
manufacturing country-made liquor, it however does not in any way 
support the contention of the respondent that irrespective of the 
eventualities in the aforementioned clauses (a), (b) and (c), the reservation 
would be of 25'Vo only of such balance stock and not otherwise. This is 
in view of the unambiguous prescript of the Policy that the reservation 
G would be of25% of the molasses produced, which by no means, can be 
construed to connote that such reservation had been contemplated to be 
only of the balance stock left over after the captive consumption of the 
sugar mill(s) concerned. Such a construction would be a total misreading 
of the Policy and would border on perversity. 
H
STATE OF UTTAR PRADESH & OTHERS v. MAWANA 
1111 
SUGARS LIMITED [AMITAVA ROY, J.] 
26. To recount, clause (3) of the order dated 09.06.2004, which 
A 
fell for scrutiny of this Court in Dhampur Sugar Mills' was in following 
terms: 
"25. The English translation supplied by the appellant at Annexure 
P-3 reads thus: 
"From the balance stock of molasses with each· sugar mill, 
B 
20% of molasses shall be reserved for the distilleries 
manufacturing country liquor. The sugar mills having their own 
distilleries shalt not be covered within this reservation to the 
extent that after the actual consumption of molasses in their 
captive distillery, 20% reservation shall be applicable on the 
balance stock." 
C 
27. This is both in text and content totally dissimilar to the above 
excerpt extracted from the Policy for the Molasses Year 2015-16. 
Whereas in the order under challenge in Dhampur Sugar Mills'~ it is 
crystal clear that the policy intended reservation to the extent of 20% of 
the molasses from the balance stock with the sugar mill, in apparent D 
contradistinction, in the Policy for the Molasses Year 2015-16, the mandate 
is for 25% reservation of the total molasses produced. The adjustment, 
if any, in the extent of reservation to be eventually made depending on 
the quantum of balance stock, in our comprehension, would not alter the 
essence of the Pol icy in the manner as pleaded by the respondent. The 
pith and purport of the two policies, being strikingly at
variance, no analogy 
is;permissible. 
28. A plain reading of paragraphs 46/47 of the decision in 
Dhampur Sugar Mills 1, (as referred to the Policy) which in its reported 
version in (2007) 8 sec 338, correspond to paragraphs 53 & 54 
authenticate the above deduction. In the overall context, we are 
abundantly clear that such reference was unwarranted and, in any case, 
had been made only to indicate the notion that physically the balance 
stock would be the stock that would be left over after the captive 
consumption of molasses by the sugar mill concerned and has no bearing 
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F 
at all on the computation of balance stock as envisaged in the Policy and 
G 
and in no manner would guide the interpretation thereof. In that view of 
the matter, the presupposition of the High Court that the Policy for the 
Molasses Year 2015-16 was based on the decbon in Dhampur Sugar 
·Mills' is patently incorrect. Such policies being an annual event, contingent 
on contemporaneous exigencies and within the realm of executive 
discernment, the High Court, in our estimate, had fallen in gross error in 
H
I 112 
SUPREME COURT REPORTS 
[2017) IO S.C.R. 
A proceeding on that premise and issuing the co'nsequential directions as 
made. Noticeably. the Policy consciously underlines that in any event 
thereby, the captive consumption of molasses by the sugar mills is not 
affected at all, so much so that if the balance stock is more than the 
extent of reservation, the whole of it would apply, but if the balance 
stock is less than the quantity to be reserved, the reservation would 
B work only to the extent of the balance stock and not in excess thereof. 
As the balance stock, if any, conceptually would be the residue after the 
utilization by way of captive consumption, in absence of the challenge to 
the Policy to be illegal, unfair, unjust, unreasonable or unconstitutional, 
the plea of the respondent that the reservation is unmistakably limited to 
C 25% of the balance stock under all situations is visibly flawed and 
fallacious. The measure of the captive consumption for the Molasses 
Year 2015-16, on the basis of such utilization for the Molasses Year 
2014-15, in absence of any overwhelming material to the contrary, also 
cannot be faulted with. 
D 
E 
F 
29. In the wake up of the above, we are of the unhesitant opinion 
that the impugned judgment being based on a total misreading of the 
Policy for the Molasses Year 2015-16 and also of the verdict in Dhampur 
Sugar Mills' in its application to the attendant facts and circumstances, 
it is clearly insupportable and unsound
in law and is thus liable to be set 
aside, which.we hereby do. 
30. As a consequence, the operative directions contained therein 
are also annulled. The appellants would ensure that the Policy is 
implemented in its fetter and spirit. The respondent would abide by the 
same and extend its cooperation without fail. The appeal is allowed. No 
costs. 
Ankit Gyan 
Appeal allowed.