SHIVASHAKTI SUGARS LIMITED versus SHREE RENUKA SUGAR LIMITED & ORS.
[2017] 2 S.C.R. 947, Supreme Court of India, 2017
Outcome: Appeal(s) allowed (Granted)
Segment: Facts
[2017] 2 S.C.R. 947 
SHIVASHAKTI SUGARS LIMITED 
v. 
SHREE RENUKA SUGAR LIMITED & ORS. 
(Civil Appeal No. 5040 of2014) 
MAY09,2017 
[A. K. SIKRI AND ABHAY MANOHAR SAPRE, JJ.) 
Sugar/Sugarcane: 
Sugarcane (Control) Amendment Orde1; 1966: Cl. 6A -
Restriction on setting up of two sugar factories within the radius of 
15 km - Establishment ~f sugar factory - Permission for - Sought 
by the appellant - Appellant granted permission to establish sugar 
factory - In the writ petitions, the High Court held that RS was an 
existing factory within the meaning of Cl. 6A; that the distance 
between the factory of the appellant and RS is less than 15 kms, 
thus, setting up of the factory by the appellant was in vio!ation of 
Cl. 6A; and that since ejfective steps were not taken, extension could 
not be given - On appeal, held: On facts, since Mis. RS would not 
be treated as 'existing sugar factory' within the meaning <!f Cl. 6A, 
the necessity of distance requirement between Mis. RS factory and 
the appellant :S factory as contained in Cl. 6A was not attracted -
Furthermore, appellant has established sugar mill and ii is 
continuing to crush sugarcane since the year 2011 - Ke.eping in 
mind all the given factors cumulatively, no pwpose would be sen•ed 
in getting the unit of the appellant closed - Public purpose demands 
that the appellant '.5 factory remain in operation and continue to 
fimction - Apart from these equitable considerations on the side of 
the appellant, economic factors
like bank loans, employment, 
generation and production at the factory serving useful public 
purpose tilt the balance totally in favour of the appellant - These 
cannot be overlooked, where there is hardly any statutory violation 
- Directions contained in the judgment of the High Court ~et aside 
- Appellant's factory to continue its operation subject to the 
condition given. 
Jurisprudence - Eco110111ic approach to law - Held:. Firstly, 
the Court is to decide the case by applying the statutory provisions -
However, while interpreting a particular provision, economic 
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impact/effect of a decision, wherever wari;anted, has to be kept in 
mind - Equally, in a situation where two vi~ws are possible or there 
is a discretion given to the court by law, Court needs to lean in 
favour of a view which subserves the economic interest of the nation 
·- Conversely, the Court to avoid that particular outcome which has 
a potential to create an adverse affect on employment, growth of 
infrastructure or economy or revenue of the State. 
Allowing the appeals, the Court 
HELD: 1.1 As regards the issue as to whether Mis. RS 
would be treated as 'existing sugar factory' within the meaning 
of Clause 6A of the Sugarcane Control Order, 1966 (as amended 
in 2006), the submission that if a sugar factory, is not 'in operation' 
on the date when a new sugar mill applies for an Industrial 
Entrepreneurs Memoranda (IEM), the old sugar factory, shall 
not be considered as an existing sugar mill, is accepted. [Para 
27] [973-F; 974-B] 
1.2 The requirement of Explanation 1 to Cl 6A is that in 
order to qualify as an existing· sugar mill, it needs to crush for 
five consecutive years. The High Court wrongly recorded that 
the requirement is of crushing for any of the one season out of 
five and this led to error on the part oflligh Court in holding that 
Mis. RS was an existing sugar factory. [Para 28) [974-C] 
1.3 The case of the appellant for setting up of the factory 
was processed keeping in
view the fact that Mis. RS was not in 
operation. Further, in one case way back in the year 1995, it had 
even granted 'no objection' certificate for setting up of the factory 
hy the appellant. Another _significant aspect to be borne in mind 
is that the State Government had passed order of liquidation of 
Mis. RS in exercise of its power under Section 72 of the 
Karnataka Co-operative Societies Act, 1951. Even a liquidator 
was appointed to undertake the liquidation process. }'rom this 
scenario, everybody would get a bonafide impression that such a 
factory which is non-operational, is going to be liquidated in due 
course of time. No doubt, subsequently the State Government 
decided to revive this factory and steps in this behalf were taken 
in the year 2008. However, .much before that IEM of the appellant 
got acknowledged on Jone 08, 2006. As on that date, then: was 
no 'existing' sugar factory within the meaning of Clause 6A of 
the Sugarcane Control Order. Therefore, the requirement of
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 949 
LIMITED & ORS. 
distance as prescribed in Clause 6A would be inapplicable. [Para 
29) [974-D-G] 
. 1.4 As. regards M/s. DS factory, as per the certificate of 
Survey of India given on June 05, 2006, distance between the 
said factory and the then proposed factory of the appellant is 
shown to be 15 km; secondly, Mis. DS had given their no objection 
to the setting up of the f~citory by the appellant on .the basis of 
which matter was processed further. The requirement of distance 
mentioned in the Amendment Order was inserted keeping in mind 
the benefit of the existing sugar factories. In a situation like this, 
when such a factory itself gave 'no objection' certificate, thereby 
waived the requirement, the bonafides of the appellant cannot be 
doubted. The purpose of distance requirement is that lhere is 
sufficient availability of sugarcane in the area so that it could easily 
cater to all the sugar factories. It is not disputed that appellant's 
factory has not adversely affected the utilisation of crushing 
capacity of either Mis. DS factory or Mis. RS factory. It was pointed 
out-by the appellant during arguments, that for last three years, 
Mis. DS factory had crushed more sugarcane than their target. 
Thus, in the facts of the instant case, the necessity of distance 
requirement between Mis. RS factory and the appellant's factory 
as contained in Clause 6A was not attracted. [Paras 30-33] [974-
H; 975-A-B;
976-D-F) 
1.5 The High Court held that the various steps taken by 
the appellant for setting up its factory, were not "effective steps" 
iu terms of Sugarcane Control Amendment Order. However, 
whether such steps would constitute as 'effective' ~teps as 
' 
. 
required by amended provisions 'contained in Clauses 6A, 6B 
and 6C. of the Sugarcane Control Order or not need not even be 
gone into. Important aspects which need to be highlighted are 
the following: 
(i) IEM of the appellant was acknowledged on June 08, 
2006. It had time till June 08, 2010 to commence commercial 
production as per the Sugarcane Control Order. 
(ii) Extension was ap111ied first on January 27, 2010 which 
was granted and thereafter second extension was granted by the 
'Union oflndia till Jnne, 2011. Commercial production commenced 
on May 25, 2011. These extensions were given after considering 
replies of the appellant to the show cause notice that was issued. 
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Even Government ofKarnataka had recommended the appellant's 
case for extension. State government had also highlighteJ the 
pnblic pnrpose behind this project, which was for the welfare of 
the farmers as well. 
(iii) The appellant took various steps for setting op of this 
factory from time to time which have been taken note of above. 
These include pnrcbase of land, placement of firm order for i>lant 
and machinery and payment of advance in· that behalf, 
commencement of civil construc!iiln, taking term loans fror.1 the 
Banks etc. 
(iv) These steps were taken along with due permissions 
which were required under different laws, duly accorded by the 
various Governmental Authorities, thus, showing its bona fides. 
(v) The appellant has incurred an expenditure of Rs.2'.19.05 
crores as per its audited balance sheet for 2015-2016. The 
expenditure on land and building as well as machinery is Rs.142.26 
crores. 
(vi) The total loans for the running nnit till year 2013 were 
to the tune of Rs. 237 crores. 
(vii) The operational cost for mooing the factory in the year. 
2012-2013 was Rs.149.29 crores. 
(viii) The a1111ella11t's unit is having 377 persons as 
employees on its rolls that are in regular employment. In addition, 
indirect employment of approximately 7150 persons duri.ng each 
crushing season is facilitated by the running of the appellant's 
factory. 
(ix) The appellant has also set up a
co-generation plant for 
prodnction of electricity which was initially 15 megawatt and, at 
present, is giving sup11ly of 37 megawatt electricity. 
(x) There is a11111le sugarcane supply in the State of 
Karnataka and, in particular, in 'R' region and, therefore, there 
is no adverse effect on the operation of any other sugar mills 
including M/s. RS and Mis. DS. [Para 34] [976-G-H; 977-A-H; 
978-AJ 
1.6 Keeping in 111i11d all the said factors cumulatively, no 
purpose is going to be served in getting the unit of the appellant 
closed. On the contrary, public purpose demands that the
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 951 
LIMITED & ORS. 
appellant's factory remain in operation and continue to function. 
Apart from equitable considerations on the side of the appellant, 
there are certain economic factors as well which tilt the balance 
totally iii favour of the appellant. These include expenditure of 
approximately Rs.300 crores by the appellant in establishing the 
factory (including expenditure on land and building to the tune of 
Rs.142.26 crores); loans raised to the tune of Rs.237 crores; 
operational cost of Rs.150 crores; generation' of employment of 
377 persons 011 regular basis and indirect employment of more 
than 7000 persons; and setting up of co-generation plant for 
production of electricity which is giving supply of 37 mw of 
electricity. These factors, particularly, bank loans, employment, 
generation and production at the factory serve useful public 
purpose and such economic considerations cannot be overlooked, 
in the context where there is hardly any statutory violation. (Paras 
35, 361 1978-B-El 
1.7 Interface between law and economics is much more 
relevant in today's time when the country has ushered into the 
era of economic liberalisation, which is also termed as 
'globalisation' of economy. India is on the road of economic growth. 
It has been a developing economy and all efforts are made, at all 
levels, to ensure that it becomes a fully developed economy. 
Various ~easures are taken in this behalf by the policy
makers. 
The judicial wing, while undertaking the task of performing its 
judicial function, is also required to perform its role in this 
direction. It called for an economic analysis oflaw approach, most 
commonly referred to as Law and Economics'. There is a growing 
role of economics in contract, labour, tax, corporate and other 
laws. Courts are increasingly receptive to economic arguments 
while deciding these issues. In such an environment it becomes 
the bounden duty of the Court to have the economic analysis and 
economic impact of its decisions. It is by no means suggested 
that while taking into account these considerations s1iecific 
provisions of law are to be ignored. First dnty of the Court is to 
decide the case by ap1Jlying the statutory provisions. However, 
on the application of law and while interpreting a particular 
provision, economic impact/effect of a decision, wherever 
warranted, has to be kept in mind. Likewise, in a sitnation where 
two views are possible or wherever there is a discretion given to 
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the Court by law, the Court ueeds to lean in favour of a particular 
view which subserves the economic interest of the nation. 
Conversely, the Court needs to avoid that particular outcome 
which. has a potential to create an adverse affect on employment, 
growth of infrastructure or economy or the revenue of the State. 
It is in this context that economic analysis of the impact of the 
decision becomes imperative. [Para.37] [978-F-H; 979-A; 980-
C-F] 
1.8 Eveit in those cases where economic interest competes 
with the rights of other persons, need is to strike a balance between 
the two competing interests and have a balanced approach. That 
is the aspect which has been duly taken care of in the instant 
case. Indian judiciary has resorted to economic analysis of law on 
ad !toe basis. Time has come to consider the inter-discipline 
between law and economics as a profound movement on 
sustainable basis. These arc the additional relevant considerations 
which have weighed in the mind in adopting a particular course 
of action in the instant case. [Paras 38, 39] [983-B-D] 
.~ 
1.9 The said factors demand this Court to exercise its power 
· under Article 142 of the Constitution. This Court would be inclined 
to do .so in the instant case keeping in view the equitable 
considerations an«J .moulding the relief. [Para 40] [983-D-E) 
1.10 The direc,tions contained in the judgment of the High 
Court are set aside and
the appellant's factory is allowed to 
continue its operation subject to the condition that 14 villages 
which were originally assigned to respondent No.l would be re-
allotted to it after taking these villages from the appellant. [Para 
41] [983-F-G] 
Mis. Qjas Industries Pvt. _Ltd v. Oudlt Sugar Mills Ltd. 
& Ors. [2007] 4 SCR 661 : (2007) 4 SCC 723; Rajendra 
Singh v. State of MP. & Ors. [1996] 4 Suppl. SCR 393 
: (1996) 5 SCC 460; Raunaq Jmernational Limited v. I. 
V. R. Construction Ltd. & Ors. (19981 3 Suppl. SCR 
'421 : (1999) 1 sec 492 - referred to. 
'Frontiers of Legal Theory' by Richard A. Posner -
referred to. 
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J2007J 4 SCR 661 
Case Law Reference 
referred to 
Para 16
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 953 
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[ 1996] 4 Suppl. SCR 393 
[1998] 3 Suppl. SCR 421 
referred to 
referred to 
Para 31 
Para 37 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 5040 
of2014. 
A 
From the Judgment and Order dated 29.03.201 l of the High Court 
B 
ofKarnataka in Writ Petition Nos. 64254 of2010 
WITH 
C. A. Nos. 5041, 5042, 5043 of2014. 
P. Chidambaram, Kavin Gulati, Basava Prabhu Patil, Ms. Indu 
Malhotra, Sr. Advs., Ms. Ruby Singh Ahuja, Vishal Gehran~, Nakul 
Gandhi, Ms. Manik Karanjawala (for M/s. Karanjawala & Co.), Gopal 
Sankarnarayan, Ms. Ranjeeta Rohtagi, Ms. Kaveeta Wadia, Shashank 
Tripathi, Ms. Liz Mathew, Dipak Kumar Jena, Rupesh Kumar, Anish 
Kr. Gupta, Vikas Bansal, D. S. Mahra, Ms. Vimla Sinha, T. C. Sharma, 
Karan Seth, Shashank Dewan, Shubhranshu Padhi, Kush Chaturvedi, 
Amjid Maqbool, Rameshwar Prasad Goyal, Ms. Anitha Shenoy, Tara 
Chandra Sharma, Vimal Sinha, G. S. Makker, Ms. Sushma Suri, Aman 
Varma, Ms. Anshula Grover, Naresh Kumar, Venkita Subramoniam T. 
R., Raghavendra S. Srivatsa, Ashok Kumar Sharma, Joseph Aristotle 
S., Ms. PriyaAristotle, K. Priyadarshini, Advs. forthe appearing parties. 
The Judgment of the Court was delivered by 
A. K SIKRI, J. l. The Industries (Development and Regulation) 
Act, 1951 (for short, the' Act') contains the provisions whereby certain 
industries mentioned in the First Sshedule to the said Act are brought 
under the control of the Union Government. It mentions, vide
Entry 25 
oftl1e First Schedule, "sugar industry" as well, to be 'scheduled industry'. 
The effect thereof is that by virtue of Sections 11 and 12 of the Act, 
· compulsory licensing is required in respect of sugar industry. Sugar is 
also one of the essential commodities covered by Essential Commodities 
Act, 1955. In respect of such essential commodities, Union Government 
is empowered to fix the prices of the product and also to regulate the 
distribution and supply of such products. In exercise of the powers 
conferred by Section 3 of the Essential Commodities Act, 1955, the Union · 
Government promulgated the Sugarcane Control Order, 1966 which, inter 
alia, provided for the minimum price of sugarcane to be fixed, power to 
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regulate the distribution and movement of sugarcane and power to issue 
licenses to cane crushers etc. Clause 11 provides that the Central 
Government may delegate to the State Government or any Officer of 
the State to perform any of the functions of the Central Government. 
2. The Government oflndia, periodically issued guidelines, •mder 
the Act, in respect of the sugar industry through 'press notes'. These 
press notes, inter alia, provided that !incenses for new sugar factories 
would be granted subject to a minimum distance requirement (which 
was varied from time to time). A Press Note no. 16 dated November 08, 
1991 provided for a 25 km distance which could however be relaxed to 
15 km in deserving cases where cane availability so justified. Clauses 2 
and 3 are important as they provided that the basic criteria would be the 
availability of the cane and the potential for development of sugarcane. 
These clauses read as follows : 
"Industrial Policy Highlights 
EXHIBIT NO. 12 
PRESS NOTE NO. 16[1991 SERIES] 
GUIDELINES FOR LICENSING OF SUGAR FACTORIES 
A. A Government oflndia have reviewed the guidelines for licensing of 
E .. new and expansion of existing sugar factories issued vi de this Ministry's 
Press Note No. 4[1990 Series] dated 23.7.1990. In sup-Oersession of 
the aforesaid Press Note, Government have formulated the following 
revised guide I ines: 
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"l. New sugar factories will continue to be
licensed for a min;mum 
economic capacity of2500 tones cane crush per day [TCD]. There will 
not be any maximtlm limit on such capacity. However, in area specified 
as industrially backward areas by the Government oflndia and certified 
by the Indian Council of Agricultural Research to be agro-climatically 
suited for development of sugarcane, licensing of new sugar factories in 
the co-operative and public sectors would be allowed foran initial capacity 
of 1750 TCD subject to the condition that the units would expand their 
capacity to 2500 TCD within a period of5 years of going into production. 
2. Licenses for new sugar factories will be issued subject to the condition 
that the distance between the proposed new sugar factory and an existing/ 
already licensed sugar factory should be 25 kms. This distance criterion
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 955 
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of 25 kms could, however be relaxed to 15 kms in special cases, where 
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can availability so justifies. 
3. The basic criterion for grant oflicenses fornew sugar units would be 
their viability, mainly from the point of view of cane availability and 
potential for development of sugarcane. 
4.All new licenses wil be issued with the stipulation that cane price will 
be payable on the basis of sucrose content of sugarcane. 
B 
5. Other things being equal, preference in licensing will be given to 
proposals from the co-operative sector and the public sector, in that 
order, as compared to the private sector. In case more than on application c 
is received.from any zone of operation, priority will be given to the 
application received earlier. 
6. Priority will continue to be given to sugar factories with cap&city less 
than 2500 TCD to expand to the aforesaid minimum economic capacity. 
7. While granting licenses for new units and expansion projects, the 
additional capacity to be created up to the end of the English Plan, i.e., 
1996-97, will be kept in view. 
8. While granting licenses for new sugar factories, industrial licenses in 
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respect of down-stream units for the use of molasses, i.e., ·industrial 
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alcohol, etc. will be given readily. 
B. Applications for licenses will be initially screened by the Screening 
Committee of the Ministry ofFood. While considering such
applications, 
the comments of the State Government/Union Territory Administration 
concerned would also be obtained. The State Government/Union lerritory 
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Administration concerned would also be obtained. The State Government/ 
Union Territory Administration would be required to furnish their 
comments within 3 months of the receipt of communication from the 
Ministry of Food. 
C. Applications for grant of industrial licenses for the establishment of 
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new sugar factories as well as expansion of existing units should be 
submitted directly to the Secretariat for Industrial Approvals in the 
Department of Industrial Development in Form IL along with the 
prescribed fee of Rs. 2500/-. A copy of the application may also be sent 
to the Ministry of Food. 
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D. The procedure and guidelines, as given above, are brought to be 
notice of the entrepreneurs for their information and guidance. 
No, I Of74lf91-LP New Delhi, the 8'" November, 1991 
B 
Forwarded.to Press Information Bureau for wide publicity to the contents 
of the above Press Note. 
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SD/-
[S.BHAVANI] 
DEPUTY SECRETARY TO THE GOVERNMENT OF INDIA 
PRINCIPAL INFORMATION OFFICER, PRESS INFORMATION 
BUREAU, SHASTRI BHAWAN, NEW DELHl-110 001." 
This Press Note was amended from time to time by Press Notes 
dated January I 0, 1996, June 15, 1998 and August 31, 1998. 
3. Press Note-12 dated August 31, 1998 is of some relevance in 
the present case. This was the result ofliberalization policy of the Central 
Government. After embarking on liberalization and globalization, in order 
to ease the doing of business, the Government decided to relax the control 
over various types of industries. By the aforesaid Notification dated 
August 31, 1998, the Government exempted persons from taking licenses 
to set up a sugar factory. This was done in exercise of power contained 
under Section 29(b) of the Act subject to the condjti-On that a minimum 
distance of 15 km would continue to be observed between an ex;sting 
sugar mill and a new mill. Pertinently, insofar as Sugarcane Control 
Order, 1966 is concerned, there was no provision of minimum distance 
between the two sugar mills. For this reason, the aforesaid Press Notes
were held to be administrative guidelines, not having statutory character 
by Allahabad High Court. 
4. The appellant herein had made an application for permission to 
establish a new sugar factory. One, Mis. Raibagh Sahakari, which was 
in the same vicinity where the appellant was seeking to establish its 
factory, gave a 'no objection' certificate to the appellant for establishing 
a sugar factory in the year 1995. The application of the appellant was 
processed and the Government of India issued a Letter of Intent (LOI) 
to the appellant on July 03, 1996 permitting it to establish a sugar factory 
at Village Saundatti, Tehsil Raibagh, District Belgaum. This was done
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 957 
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before the new policy was announced vide Press Note-I 2 dated August 
31, I 998, i.e., during the Licence Raj . After the aforesaid Press Note, 
there was paradigm shift in the approach as no licence was now required 
and instead requirement was to file an Industrial Entrepreneurs 
Memoranda (JEM) only. Accordingly, only condition which was to be 
fulfilled by the appellant was that there was no sugar factory existing 
within the radius of 15 km from the appellant's proposed site w~ich was 
so stipulated in Press Note dated August 31 1988, i.e., by administrative 
decision. On June 05, 2{)06, the Commissioner of Cane Development/ 
Director of Sugar issued a certificate to this effect certifying that there 
was no such sugar factory within the radius of 15 km from the appellant's 
site. After the issuance of this certificate, the appellant filed its IEM 
which was duly acknowledged by the Ministry of Commerce and 
Industries. 
5. We may point out, at this stage, that the present dispute is about 
the existence of Raibagh Sahakari Factory, i.e., whether it is within the 
radius of 15 km from the appellant's factory or not? Pertinently, on 
January 24, 2004, the Government of Karnataka had passed an order of 
liquidation ofRaibagh Sahakari in exercise of its power under Section· 
72 of the Karnataka Co-operative Societies Act, 1951. Certain 
developments took place qua Raibagh Sahakari
thereafter. We would 
like to state those events and developments subsequently, though these 
events were taking place simultaneously with the process of setting up 
of the factory by the appellant. It would be apposite to first take note of 
the manner in which the appellant has set up its factory at the proposed 
site. 
6. As pointed out above, the appellant filed its JEM on August 08, 
2006, supported by the certificate issued by the Cane Development 
Commissioner that there was no existing sugar factory within the radius 
of 15 km. Thereafter, on October 20, 2006, the Government of Karnataka 
granted permission to the appellant for purchase of agricultural lands for 
industrial purposes in Raibagh Taluk in village Yadrav. Similar permission 
was granted under Section 109( 1) of the Karnataka Land Reforms Act, 
1961. Similar permission under Section 109(1) on November 20, 2006 
for land admeasuring a total of 38 acres and 11 guntas for setting up a 
sugar factory in village Yadrav and Saundutti was also granted by the 
Deputy Commissioner, Belgaum. 
7. The Karnataka Uayog Mitra set up under the Karnataka 
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Industrial Facilitation Act, 2002 forwarded a proposal to the Commissioner 
for Cane Development, for setting up a sugar factory by the appellant. 
It was placed before the State High Level Clearance Committee, inviting 
comments from Commissioner. 
8. On November 03, 2006, the Karnataka Udyog Mitra, act:ng as 
a single window for clearance of projects in the State invited comments 
from the Deputy Cane Commissioner with regard to specific survey 
numbers in villages Saundutti and Yadrav, describing the type of land 
which was required to be sued. While this process was on, another 
significant development took place with which this case is directly 
concerned. 
9. While the !EM of the appellant was being processed, a signiiicant 
step was taken by the Government of India, which has turned out to be 
very crucial for the appellant's factory. The Sugarcane (Control) 
Amendment Order, 2006 was brought into force on November I 0, 2006. 
Clauses 6A to 6E were inserted. Now by Clause 6A, a minimum distance 
requirement of 15 kms was brought into force. This requirement, which 
was hitherto administrative in nature, has, become a statutory 
requirement. However, only Clauses 6B(l) to 6D were made appli~able 
by virtue of Clause 6E to industries whqse IEM stood acknowledged till 
this date. Thereafter, following steps were undertaken for establishment 
of the factory by the appellant: 
(a) The Karnataka Pollution
Control Board inspected the site at 
village Yadrav and Saundutti and gave its opinion on December 15, 2006 
with regard to the viability of the project to the Karnataka Udyog Mitra. 
(b) Another factory, known as Doodhganga Sugar Factory also 
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issued its No Objection Certificate for establishment of the sugar factory 
at village Saundutti. 
(c) The Director oflndustries informed the appellant on May 03, 
2007 that its project of establishing a 3000 TCD plant, 12 M\V Co-
generation Plant and 30 KLPD Molasses to Ethanol Plant with an 
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investment of Rs. 106.840 Crores in Saundutti and Yadrav villag's had 
been cleared by the High Level Committee of the State. 
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(d) The Canara Bank granted a perforinance guarantee for Rs. I 
Crores as per the requirement of Clause 6A Explanation 2 r/w clause 
6E(2) of the Order, 2006.
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 959 
LIMITED & ORS. [A. K. SlKRl, J.) 
(e) The Survey oflndia on an application by the appellant issued 
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a Distance Certificate certifying that the distance between the arpellant's 
factory and that of Mis. Raibagh and Shree Doodhganga was not less 
than 15 Kms. 
(t) The Cane Commissioner, issued a Certificate stating that the 
crushing operations of Mis. Raibagh had stopped from 2001-2002. 
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(g) The Government ofKarnataka allotted 14 villages of Raibagh 
and six of Doodhganga to the appellant. 
(h) The Commissioner, Cane Development/ Director of Sugar 
certified that the distance of the two factories in question from the 
appellant's unit was more than 15 kms vide its letter dated August 17, 
2007. 
(i) Appellant was granted permission under the Knrnataka 
Industries (Facilitation) Act, 2002 on November 07, 2007. 
0) After obtaining all requisite permissions, various steps were 
taken by the appellant such as, purchasing land, placing an order for 
machinery, placing an order for setting up civil works and applications 
and approvals for financial assistance. 
(k) The Government oflndia accepted the performance guarantee 
submitted by the appellant on April 15, 2008 and directed it to file the 
progress report of the project. 
(I) The Gram Panchayat Diggiwadi granted and NOC for 
establishment for factory at village Yadrav. 
(m) The Gram Panchayat Diggiwadi granted an NOC for 
establishment of factory at Village
Saundutti. 
(n) The appellant submitted progress reports to the ChiefDirecto;·, 
Sugar for the month of September, 2008. Further, progress repcrts dated 
October 31, 2008, July 30, 2009, January 27, 2010 were also submitted. 
(o) NOC was issued by the Pollution Control Board for setting up 
the appellant unit. As the Raibagh factory stood closed, the Government 
took steps to restart the factory and after a tender process Shree Renuka 
Sugar was allowed to restart the factory, for which a lease C:eed Wl's 
executed. 
Even the grant of this lease was challenged in a bunch of writ 
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petitions bearing no. 31661 of2008 and connected matters. These writ 
petitions were dismissed by an order dated February I 0, 20 I 0 wherein, 
in para 4 of that order, it was noticed that the sugar factory had stopped 
crushing since 2001-2002. 
(p) The appellant filed an application dated January 27, 20 I 0 before 
the State Government with the request to make a recommendation for 
permission to extend time for implementing the project. 
(q) In view of the progress reports submitted by the appellant on 
March 09, 20 I 0, the Government of Karnataka referred the appellant's 
case for extension of time for taking effective steps and commencement 
of production. The appellant also requested for extension of time. 
(r) First show cause notice dated April 29, 20 I 0 was issued by the 
Government oflndia requiring the appellant to state why its performance 
guarantee not be.forfeited for not taking effective steps. 
(s) A detailed reply dated May 06, 2010 was submitted by the 
appellant, detailing the effective steps taken. 
(t) The appellant wrote letter dated June 21, 2010 to the Chief 
Director, Sugar, detailing the steps taken and requesting for extension of 
time. It was followed by another letter dated July 22, 20 I 0 to the Chief 
Director, Sugar, detailing the steps taken and requesting for extension of 
time bringing to its notice that 7. I 7 acres of!and had been purchased 
and loan had been
sanctioned. It was pointed out that the Director had 
been shot at and was in hospital for a year leading to delay. 
(u) Considering the reply filed by the appellant, the Government 
oflndia dropped the show cause notice and granted an extension to the 
appellant to commence production by December 07, 20 I 0. 
(v) The Labour Commissioner granted registration to the appellant. 
(w) Government of Karnataka, on Noven_iber I 6, 20 I 0, requested 
GOJ for a further extension. The Government of India granted the 
second extension of time to the appellant till June 07, 201 I. It is an 
admitted case that factory was duly set up and production started before 
June 07, 201 I. The appellant has also been given the environmental 
clearance. Government of India even granted licence dated March 24, 
2011 for crushing for the season 20 I 0-20 I I. 
I 0. After recapitulating the aforesaid background leading to the
SHJVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 961 
LIMITED & ORS. [A. K. SIKRI, J.] 
establishment of factory and start of production in the said factory by 
the appellant herein, we now advert to the contentious issue cf setting 
up of this factory within 15 km from the sugar factory, Raibagh Sahakari. 
As pointed out above, on November 06, 1995, Mis. Raibagh Sahakari 
had issued 'no objection' certificate to the appellant. In any case, on 
January 24, 1995, order of liquidation in respect of Raibagh Sahakari 
was passed by the Government ofKarnataka. On September 14, 2006, 
the Cane Commissioner had written to the Secretary, Government of 
Karnataka bringing to its notice the fact that in Raibagh Taluk, the total 
production of sugarcane was 23.32 lakh tonnes as on that date Raibagh 
Sahakari factory_was lying closed. According to the appellant, because 
of this reason there was excess cane available which was being taken 
to Maharashtra from Karnataka, thus, causing the loss to the exchequer. 
Jn this backdrop, another factory Doodhganga Krishna Sahakari which 
was in the same vicinity (though more than 15 kms away) had given 'no 
objection' dated August 12, 2006 for allocating six villages to the 
appellant's proposed factory. 
• 
i I. Insofar Raibagh Sahakari Factory is concerned, a liquidator 
had been appoi~ied by the State Government. The State Government, 
however, made endeavour thereafter to revive this sugar mill. For this 
purpose on July 19, 2007 the
Government notified tenders for giving this 
factory by way oflease. This Notification inviting tender was challenged 
by certain persons in the form of writ petition filed in the High Court. 
The High Court dismissed the writ petition, thereby upholding the action 
of the Government to invite tenders. In this order dated January 10, 
2008 passed by the High Court, it was categorically noted as a fact that 
this Raibagh factory was lying closed from the year 2001-2002. Be as 
it may, the tender process went on and ultimately tender of Respondent 
No. I herein, i.e., Shree Renuka Sugar Limited was accepted and lease 
deed dated October 16, 2008 was executed in favour of Respondent- 1 
thereby allowing it to restart the said factory. Even this grant of lease 
was challenged in a bunch of writ petitions which were dismissed by the 
High Court on February I 0, 2010. In this order as well, the High Court 
again noticed that since the factory had been lying closed since 2001.-
2002, it needed a restart which was in public interest. In this manner, it 
is Respondent no. I which is now running Raibagh Sahakari factory and 
has now taken a position that since Raibagh Sahakari is with in the radius 
of 15 kms from the place where appellant had set up its factory, as per 
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the provisions of clause 6A ofS~garcane (Control) Amendment Order, 
2006, no permission could have been given to the appellant to start its 
factory. 
12. It may be noted here that between June, 20 I 0 and November, 
20 I 0, four writ petitions, in quick succession, came to be filed against 
the appellant for stalling its project, at the stages when substantial work 
had been accomplished by the appellant for setting up of the factory. 
The details of these writ petitions are as under:-
1. On June 17, 2010: W.P. No. 64254of2010 filed by Renukaat 
Dharwad for declaring the !EM dated June 08, 2006 tc have 
lapsed. No interim Order passed in this case. 
2. 
On September 14, 2010: W.P. Nos. 66903-907/2010, W.P. 
Nos. 66926-35/20 I 0, purportedly filed through some members 
of Mis. Raibagh Sahakari. No interim order passed in this 
case also. 
3. 
On October 18, 20 I 0: W.P. No. 66920/20 I 0 and W.P. No. 
66972-990/20 I 0 filed by ce11ain members of Doodhganga 
Krishna Sahakari of Nandi. In this case, an interim order 
was passed to the effect that all steps taken by the appellant 
would abide by the result of the writ petitions. 
4. On November 26, 2010: W.P. No. 37143 of2010 filed as PIL. 
13". These writ petitions were finally heard together and have been 
decided by the High Court vide impugned judgment dated March 29, 
2011. The High Court has held that the distance between the factory of 
the appellant and
Raibagh Sahakari is less than 15 kms and, therefore, 
the setting up of the factory is in violation of clause 6A of the Sugarcane 
(Control) Amendment Order, 2006. As a consequence, the IEM of the 
appellant is held to be derecognized. The High Court has also held that 
extensions dated August 18, 20 I 0 and December 0 I, 20 I 0 were without 
jurisdiction as "effective steps" in terms of Sugarcane Control 
Amendment Order were not taken and, therefore, no extension could be 
given. 
14. It has already been pointed out that the Survey of India had 
issued the certificate dated July 16, 2007 certifying that distance between 
the appellant's proposed factory and Raibagh Sahakari factory as well 
as Doodhganga was more than 15 kms. Before the High Court, Survey
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 963 
LIMITED & ORS. [A. K. SIKRI, J.] 
oflndia had filed an affidavit stating that such certificate was issued as 
per the prevailing procedure which was prevalenttill December 31, 2007. 
It was further pointed out that the Survey of India had notified new rules 
for measuring distance on September 02, 2007. The measurement of 
distance, as per new Rules, showed that distance between the two 
factories was less than 15 kms. Such a clarification was given by the 
Survey of India in the High Court in the aforesaid writ rctitions. 
Significantly, the Survey oflndia had not recalled its certificate dated 
July 16, 2007 on the basis of which the case of the appellant for setting 
up the factory was processed and all due permissions accorded to it. 
I 5. The appellant filed Special Leave Petition against the impugned 
judgment in which notice was issued on May 13, 2011 and operation of 
the factory was stayed till further orders. Thereafter, leave was granted 
and this stay has contfnued. As a result, the factory of the appellant is 
still operational. Certain further events which have taken place after 
filing of the said Special Leave Petition, in which leave was granted 
thereby co·nverting it into civil appeal, may also be noted at this stage: 
(i) The Government grants Factories Act approval. 
(ii) RTI information from Raibagh stating that there was no 
crushing from 2002-03. 
(iii) Statement issued by Joint Collector,
Agriculture showing the 
total availability of sugarcane for the Belgaun District. As 
per this, a sufficient quantity of sugarcane is available to take 
care of the needs of all the factories in that area. 
(iv) The Pollution Control Board indicates that M/s. Raibagh did 
not have air and water pollution clearances between 2002-
08. 
(v) The Government informs tlwt 1herc was no license! obtained 
by Raibagh Sahakari for the years 2003-2008 for crushing. 
(vi) Cane Commissioner under RTI infom1s that there is no 
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application by Raibag Sahkari for crushing from 2001-208. 
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(vii) Najilingappa Sugar Institute issues a rep01t giving rletails of 
sugarcane available, crushed and uncrushed till 2011. 
(viii) While the present appeals were pending, this Court directed 
the Survey oflndia to undertake fresh measurements as per 
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the policy of measurements now formulated from January 
01,2008. 
16. A perusal of the order of the High Court would reveal that all 
the official respondents, viz., the Union of India, the Commissioner for 
Cane Development and Director for Sugar (Government of Karnataka), 
the Government of Karnataka as well as the Survey of India had 
supported the appellant herein, by filing their detailed responses-cum-
statement of objections in the writ petitions filed in the High Court. The 
Union of India had, imer a/ia, pointed out that the minimum distance 
criteria of 15 km as mentioned in Press Note dated August 31, 1998 was 
directive in nature and not mandatory and in this behalf reference was 
made to the judgment of Allahabad High Court. At the same time, Delhi 
High Court had decided otherwise. In view of these developments, 
expert advice of Department of Legal Affairs was sought which opined 
that Sugarcane (Control) Order, 1966 may be amended suitably. In the 
meantime, even this Court vide its order dated September 05, 2006 in 
the case of Mis. Ojas Industries Pvt. Ltd. v. Oud/1 Sugar Mills Ll<l 
& Ors. /(2007) 4 SCC 723] granted eight weeks time to the Uni<ih of 
India to iron out some of the difficulties highlighted by the parties in the 
said case. This led to the amendment in the Sugarcane (Control) Order, 
1966 vide amendment dated November 10, 2006 giving statutory backing 
to the concept of
minimum distance. This order was made applicable to 
the date of issuance of the order i.e. Novemb_er 10, 2006. The Union of 
India also pointed out in its counter affidavit that in the case of Mis. 
Ojas Industries Pvt. Lul, this Court held that the said amendment was 
retrospective in operation and also highlighted the consequence ofnon-
implementation of !EM within the period stipulated. Since four years 
time to commence the commercial production was provided in the 
Amendment Order, 2006 and this amendment was held to be retrospective 
by this Court, advice of the Additional Solicitor General of India was 
sought as to whether the Bank Guarantees given by such persons should 
be accepted or not. The Additional Solicitor General oflndia in his letter 
dated June 18, 2007 advised the Government that the Department should 
not accept the Bank Guarantees from the first or earlier persons whose 
IEMs were acknowledged in the years J 998/1999/2000 i.e. prior to June, 
2003 and who had not taken effective steps. He further advised that 
Bank Guarantees can only be accepted from the first or earlier !EM 
holders in terms of Clause 6E of the Control Order, 2006 ifthe time limit
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 965 
LIMITED & ORS. [A. K. SlKRI, J.] 
of four years, as prescribed in Clause 6C has not expired. The 1.Jnion of 
India further stated that the matter of the appellant was examined in the 
light of the aforesaid opinion and that the extension of time for completing 
the project and to commence the project was given. Insofar as issue of 
distance is concerned, as per the Union of India, since the certificate 
issued by the Survey oflndia was on record, which was valid and since 
it disclosed that the sugar factory was beyond 15 km from the existing 
factory, the appellant was allowed to go up with the setting up of the said 
factory. 
17. The Sugarcane Commissioner in his statement of objections 
to the writ petitions mentioned that the State Government had, vide its 
order dated November 07, 2"007, granted 'in-principle clearance' for 
establishment of the sugar factory.' It was found that Raibag Sahakari 
factory was lying close for several years and the order of liquidation has 
been passed by the State Government. From the year 2001-20')2 itself, 
the crushing activity of the said Raibag Sahakari factory came to be 
stopped. It was also pointed out that in the year 1995 itself, Raibag 
Sahakari had conveyed a 'No Objection Certificate' for establishment 
of factory by the appellant. Apart from this, on a recommendation made 
by the Deputy Commissioner regarding the viability and availability of 
the cane in the area
concerned, respondent-Authority has passed an 
order known as 'The Karnataka Sugarcane (Regulation of Distribution) 
Mis. Shivashakti Sugars, Saudatti Village, Raibag Taluk, Order 2007'. 
The said order admittedly is not called into question by the app~llant nor 
by Raibag S<ihakari Sakkare Karkhane. They have accepted the said 
order. According to the Cane Commissioner, the al location of cane area 
made in favour of Mis. Shivashakti Sugars (the appellant) is an informed 
decision. It is a decision made on the basis ofrelevant materiais. It is a 
decision made eminently in public-interest, that is to say, in the interest of 
sugarcane farmers growing sugarcane in and around Raibag Taluk. The 
Cane Commissioner also emphasised in his affidavit filed in the High 
Court, that Deputy Commissioner, Belgaum vide its communication dated 
August 25, 2006 has made a recommendation for allocation of 16 villages 
situated in Raibag Taluk and 7 villages situated in Chikodi Taluk to be 
allocated in favour of the appellant and on receipt of this communication, 
a meeting was convened under the Chairmanship of the Secretary, 
Commerce & Industries Department, on May 12, 2006. It was noticed 
that the Taluk Agricultural Officer had reported that the total potential of 
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sugarcane growth is 23 .22 lakh tones per year and that the necessity of 
the appellant was merely 5 lakh tone per year. It was also noticed that 
in view of the closure of Raibag Sahakari Sakkare Karkhane, sugarcane 
growers of the said area were forced to supply sugarcane to Doodhganga 
Sahakari Sakkare Karkhane and Halasiddanatha Sahakara Sa"kare 
Karkhane. Those two factories also were unable to receive the 
sugarcane so grown, resulting in the sugarcane farmers being forced to 
carry their sugarcane to the neighbouring State of Maharashtra, which 
has counter productive of the interest of the farmers in general. It was 
also pointed out that thereafter notices were issued to Doodhganga 
Sahakari Sakkare Karkhane as well as Raibag Sahakari Sakkare 
Karkhane for another meeting which was held on 04.06.2007 wherein 
the Managing Director of Raibag Sahakari Sakkare Karkhane concurred 
with the recommendation made by the DepOty Commissioner and 
Doodhganga Sahakari Sakkare Karkhane also issued no objection. Taking 
"into account these factors, the State Government had passed the order 
dated November 07, 2007. Another significant aspects highlighted by 
the Sugarcane Development Commissioner were that for the year 2008-
2009, Raibag Sahakari Sakkare Karkhane had crushed only 20,573 tonnes 
of sugarcane, whereas its crushing capacity is 4 lakh tonnes. Out of23 
lakh tones of sugarcane so grown in that area,
if the entire 4 lakh tones 
is given away to Raibag Sahakari Sakkare Karkhane, yet there would 
be excess cane available in the area. In these circumstances, the 
commencement of the appellant's factory would be actually in the interest 
of sugarcane farmers, which would encourage sugarcane growth dn\Iit 
will also prevent the farmers from transporting their sugarcane outside 
the State. There has been under-crushing of sugarcane frown in the 
entire State as such. In fact, for the year 2007-2008, it was noticed that 
as against the growth of 340 lakh tonnes of sugarcane, only 270 lakh 
tones was crushed, thereby leaving about 70 lakh tonnes of sugarcane 
remaining uncrushed. For the year 2008-2009, it was projected that 90 
lakh tonnes would go without crushing. Therefore, the State Goven;ment 
announced several incentives to sugarcane farmers for paying 
compensation for uncrushed sugarcane and also incentives to Sugar 
Factory were given to crush sugarcane apart from the allocated area, 
with an incentive of Rs. I 001- for every tone of sugarcane so crushed. 
All these would go to show that commencement ofnew Sugar Factories 
would be in the interest of all concerned and in the public interest.
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 967 
LIMITED & ORS. [A. K. SIKRI, J.] 
18. The appellant, in its counter affidavit filed in the High Court, 
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apart from reiterating the aforesaid facts, submitted that entire action of 
the appellant, in this behalf, was bonafide and it had invested s~bstantial 
amounts for the establishment of the factory. Therefore, there was no 
reason to interfere in the matter. 
19. Survey oflndia also opposed the writ petitions. It justified its 
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earlier distance certificate by mentioning that the area was measured by 
taking recourse to the methodology that was operating at that.time. 
20. On the basis of pleadings in the said writ petitions and the 
arguments that were advanced by the counsel for the writ petitioners 
and the respondents, the High Court formulated as many as five points c 
which arose for consideration in all those writ petitions which are as 
follows: 
"(I) Whether Shivashakti Sugars has set up a sugar factory at 
Saundatti Village in accordance with law in as much as 
(a) is there a valid industrial entrepreneur memorandum filed in 
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accordance with the Sugarcane Control Order; 
(b) is the new sugar factory established beyond 15 kms from the 
existing sugar mills viz. Doodaganga Sugar Mills and Raibagh 
Sugar Mills; 
(c) the distance certificate obtained is in accordance with law; 
(d) after filing of the IEM whether effective steps have been 
taken in terms of Explanation IV to Clause 6A of the 
Sugarcane
Control Order such as: 
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(i) whether the land required for setting up the industry is 
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acquired; 
(ii) whether civil construction and building was commenced 
within the stipulated period of two years; 
(iii) whether firm order for plant and machinery and the letter 
of credit was within two years period; 
(iv) whether requisite finance has been arranged 
(2) If effective steps are not taken within the stipulated period of 
two years, whether IEM stands de-recognised'! 
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(3) Whether the order of extension passed by the Central 
Government is valid in accordance with law or is void ab initio 
and nonest? 
(4) Whether these writ petitions filed are not maintainable and 
liable to be dismissed on the ground of delay, !aches, want of 
bonafides and on the ground that no public interest is involved? 
(5) What order?" 
21. Thereafter, the High Court discussed, in great detail, each of 
the aforesaid points and came to the conclusion that 'effective steps' as 
required under the provision of Sugarcane (Control) Order were not 
taken by the appellant; the order giving extensions to the appella~t for 
completing the objections were not valid; there could not be any new 
sugar factory established by the appellant in view of existing sugar 1nills, 
namely, Doodhganga Sugar Mills and Raibag Sugar Mills with in 15 km 
from the sugar factory of the appellant; the Survey of India had not 
determined the distance by conducting the measurements independently; 
clause 6A of the Sugarcane Control Order was mandatory and 
retrospective in nature and, therefore, was applicable in the case 0fthe 
appellant as well. In the process, the High Court also held that Raibag 
Sugar Factory was an existing factory within the meaning of clau:;e 6A 
of the Sugarcane Control Order 200,6. 
22. The appellant has challenged the aforesaid findings of the 
High Court. In the first instance~ it is argued that
interpretation of clause 
6A of the Sugarcane Control Order by this Court in Mis. Ojlls Industries 
case holding it to be retrospective, is per incuriam. It is also a;gued 
that, in any case, since Mis. Raibag Sahakari Sakkare Karkhane was 
not an existing sugar factory at the relevant time, rigours of clause 6A 
was not applicable in the case of the appellant as the question of distance 
did not arise. It was also argued that the findings of the High Court that 
the appellant did not take effective steps as per explanation to clause 6A 
was clearly erroneous and, therefore, it resulted in an automatic de-
recognition of the IEM of the appellant. The appellant has quest:oned 
the correctness of the decision of the High Court insofar as it holds that 
extensions given by the Union of India were inappropriate. Even the 
locus standi of the writ petitioners who filed the writ petitions is 
challenged. It was also submitted that having regard to the subsequent 
events and particularly to the effect that very substantial amount was 
spent by the appellant on the establishment of the factory and appellant
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 969 
LIMITED & ORS. [A. K. SIKR!, J.] 
had taken all possible steps and sanctions from various Authorities, it 
should not be made to suffer the closure of the factory since the factory 
of the appellant is in business from the year 20 l 1. In nutshell, following 
issues have been raised for consideration: 
(a) Whether Clause 6A of the Sugarcane Control Order, 1966 (as 
amended in 2006) can be made applicable to an entrepreneur, 
who has been granted an !EM prior to the amendment on 
November l 0, 2006 and whether the judgment of this Court in 
the case of Oj11s lnt/ustries case, insofar as it holds Clause 
6A to be retrospective, is per i11curia111? 
(b )Whether assuming that Clause 6A is applicable to an !EM holder, 
prior to the 2006 amendment, would this Clause be applicable 
in the present case as M/s ... Raibagh Sahakari Sakkare 
Karkhane Niyamit was not an existing sugar factory (within 
the meaning of explanation I to Clause 6A)? 
( c) Whether the High Court was correct in holding that the appellant 
did not take effective steps (as per explanation 4 to Clause 
6A), within the time frame specified under Clause 6C of the 
Sugarcane Control Order, 1966? 
(d)Whether the High Court was coITect in concluding that if the 
effective steps are not taken within the time specified, the same 
would result in an automatic re-recog1iition would be an order 
for shutting down the unit? 
(e)Whether the High Court was correct in
concluding that the 
extensions for commencing commercial production were 
incorrectly granted by the Union of India, as the application 
for extension was not filed before the !EM had lapsed? 
(t)Whether the petitioners in the four writ petitions, could be 
considered persons aggrieved and had locus to maintain the 
writ petitions? 
(g)Whethereven if the High Court is correct in law, in view of the 
subsequent events, i.e. the establishment of the sugar mill by 
the appellant and it continuing to crush sugarcane since the 
year2011, the appellant's factory may be permitted to continue, 
in the interest of justice, in the facts and circumstances of the 
present case?" · 
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23. We feel that it would be more appropriate to first deal with the 
issues (b) and (g}, inasmuch as our answer thereto would reveal that 
there is no need to traverse through the other issues at all. 
24. Before we touch upon the discussion on these issues, let us 
reproduce the provisions of Clauses 6A to 6C and 6E of the Sugarcane 
(Control) Order which were introduced by way of an amendment in the 
year 2006. These are set out as under: 
~'6-A Restrictio1r on setting up_ ut· two s11g<1r factories wit/1in 
tile radius of15 km.-Notwithstanding anything contained in 
clause 6, no new sugar factory shall be set up within the radius of 
15 km 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 km or different minimum distances not less than 15 km 
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 factorv that has 
taken all effective steps as specified in Explnnat10n 4 '" ,.;, u;~ a 
sugar factory but excludes a sugar factory that ha, llul .:arnccl 
out its crushing operations for last five sugar seasons. 
Explanation 2.-A new sugar factory shall mean a
sugar faclory, 
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 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 determiI1ed as 
measured by the Survey of India. 
Explanation 4.- The effective steps shall mean the following steps 
taken by the person concerned to implement the industrial 
Entrepreneur Memorandum for setting up of sugar factory-
SHIVASHAKTI SlJCARS LIMITED v. SHREE RENUKA SUGAR 
LIMITED & ORS. [A. K. SIKRI, J.] 
(a) purchase of required land in the name of the factory; 
(b) placement of firm order for purchase of plant and mqchinery 
for the factory and payment of requisite advance or opening 
of irrevocable letter of credit with suppliers; 
(c) commencement ofcivil work and construction of building for 
the factory; 
(d) sanction of requisite term loans from banks or rinancial 
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.- (!)Before filing the IEM with the Central 
Government, the concerned person shall obtain a Certificate from 
the Cane Commissioner or Director [Sugar] or specified authority 
of the State Government concerned that the distance between 
the site where he proposes to set up sugar factory and adjacent 
existing sugar factories and new sugar factories is not less than 
the minimum distance prescribed by the very Central Government 
or the State Government, as the case may be, and the person 
concerned 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 
person concerned 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 offiling the Industrial EntrP,preneur 
Memorandum as a surety for implementation of the Industrial 
Entrepreneur M,emorandum within the stipulated time or extended 
time as specified in clause 6-C failing which Industrial 
Entrepreneur Memorandum shall stand derecognised as far as 
provisions of this order are concerned. 
6-C. Time-limit to imp/eme1i( /11du~·tria/ E11trepre11e11r 
Memora11dum.- The stipulated time for taking effective steps 
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shall be two years and commercial production shall commence 
within four years with effect from the date of tiling the Industrial 
Entrepreneur Memorandum with the Central Government, failing 
which the Industrial Entrepreneur Memorandum shall 
stand 
derecognised 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 State 
Government concerned, may give extension of one year exceeding 
six months at a time, for implementing the Industrial Entrepr.:!neur . 
Memorandum and commencement of commercial production 
thereof. 
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6-E. Application of clauses 6-B, 6-C and 6-D to the person 
D 
whose Industrial Entrepreneur Memorandum has already 
been acknowledged.-
(!) Except the period specified in sub-clause (2) of clause 6-B of 
this order, the other provisions specified in clauses 6-B, 6-C 
and 6-D shall also be application to the person whose Industrial 
E 
Entrepreneur Memorandum has already been acknowledged 
as on date of this notification but who has not taken effective 
steps as specified in Explanation 4 to clause 6-A. 
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(2) The person whose Industrial Entrepreneur Memorandum has 
already been acknowledged as on date of this notificatio.n but 
who has not taken effective steps as
specified in Explanation 
4 to clause 6-A shall furnish a performance guarantee of 
rupees one crore to the Chief Director (Sugar), Department 
ofFood and Public Distribution, Minist1y of Consumer Affairs, 
Food and Public Distribution within a period of six months of 
issue of th is notification failing which the Industrial 
Entrepreneur Memorandum of the person concerned shall 
stand derecognised as far as provisions of this order are 
concerned." 
25. The aforesaid provisions stipulate the steps which an 
entrepreneur has to take in an establishment of a sugar factory. These
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 973 
LIMITED & ORS. [A. K. S!KRJ, J.] 
provisions aim mention time limit to implement !EM provisions which 
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are made for extension of time as well. Consequences of non-
implementation of the provisions are also laid down. 
Clause 6A also defines what is an existing sugar factory and what 
is a new factory. This Clause also stipulates the distance requirement 
and how the minimum distance of 15 km provid,>d therein shall be 
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determined. With this, we advert to the discussion on issues (b) and (g) 
in the first instance. 
Issue (b) 
26. M/s. Chidambaram and Kavin Gulati, senior advocates argued 
the matter on behalf of the appellant. It was their submission that on the 
date when the appellant applied for and got acknowledged its !EM on 
June 08, 2006, M/s. Raibag Sahakari Sugar factory was not in operation 
on that date. Therefore, distance requirement as provided far under 
Clause 6A was not applicable in the instant case. It was also emphasised 
that M/s. Raibag Sahakari had not crushed sugarcane since 2001-2002 
i.e. in the last five crushing seasons prior to June 08, 2006, which was 
also a relevant consideration to hold that distance requirement was 
inapplicable in this case. It was submitted that there was a clinching 
evidence to prove the aforesaid facts inasmuch as th is has been judicially 
acknowledged in the orders of the High Court itself while dea1ing with 
the challenge to the action of the State
Government in inviting tenders 
for giving lease to Mis. Raibag Sahakari and while deciding cha:Ienge to 
the grant of the said lease in favour of respondent No.1. 
27. We may point out at this stage that the aforesaid fact is not in 
dispute. There cannot be any quarrel about the same having regard to 
plethora of evidence produced in support of this submission which has 
already bee11 recorded above. The question is as to whether M/s. Raibagh 
Sahakari would be treated as 'existing sugar factory' within the meaning 
of Clause 6A of the Sugarcane Control Order. It is the case of the 
appellant that Clause 6A of the Sugarcane Control Order provides a 
minimum distance of 15 km to be maintained between an existing sugar 
factory and another new sugar factory. Explanation 1, defines an existing 
sugar factory. This explanation is in three parts. The first part provides 
that a factory shall be considered as an existing sugar factory to be a 
sugar factory 'in operation'. The second part provides that, it shall also 
include a sugar factory that hds taken all effective steps as specified in 
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explanation 4. The third part provides that a sugar factory shall not be 
considered as an existing sugar factory if 'a sugar factory that has not 
carried out its crushing operations for the last five sugar seasons'. It is 
submitted that if a sugar factory, is not 'in operation' on the date when a 
new sugar mill applies for an IEM, the old sugar factory, shall not be 
considered as an existing sugar mill. 
28. The learned counsel for respondent no. 1 heavily relied upon 
the reasoning in the impugned judgment of the High Court to support his 
case. There appears to be force in the aforesaid submissions of the 
appellant. Requirement of Explanation 1 to Clause 6A is that in order to 
qualify as an existing sugar mill, it needs to crush for five consecutive 
years. We find that the High Court has wrongly recorded that the 
requirement is of crushing for any of the one season out of five and this 
has led to error on the part of the High Court in holding that Mis. Raibagh 
Sahakari was an existing sugar factory. 
29. Another aspect which becomes relevant in this behalf (and 
would also have bearing while deciding issue (g)) is that the case of the 
appellant for setting up of the factory was processed keeping in view 
the.fact that M/s. Raibagh Sahakari was not in operation. Further, in 
one case way back in the year 1995, it had even granted 'no objection' 
certificate for setting up of the factory by the
appellant. Another significant 
aspect which is to be borne in mind is that the State Government had 
passed order of liquidation ofM/s. Raibagh Sahakari in exercise of its 
power under Section 72 of the Karnataka Co-operative Societies Act, 
1951. Even a liquidator was appointed to undertake the liquidation process. 
From th is scenario, everybody would get a bonafide impression that such 
a factory which is non-operational, is going to be liquidated in due course 
of time. No doubt, subsequently the State Government decided to revive 
this factory and steps in this behalf were taken in the year 2008. 
However, much before that IEM of the appellant was got acknowledged 
on June 08, 2006. As on that date, there was no 'existing' sugar factory 
within the meaning of Clause 6A of the Sugarcane Control Order. 
Therefore, the requirement of distance as prescribed in Clause 6A would 
be inapplicable. 
30. Insofar as M/s. Doodhganga Sahakari factory i.s concerned, 
two aspects need to be stressed upon. First, as per the certificate of 
Survey oflndia given on June 05, 2006, distance between the said factory 
and the then proposed factory of the appellant is shown to be 15 km.
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 9/5 
LIMITED & ORS. [A. K. SIKRI, J.] 
Secondly, M/s. Doodhganga Sahakari had given their no objection to the 
setting up of the factory by the appellant on the basis of which matter 
was processed further. 
31. We have to keep in mind that the requirement of distance 
mentioned in the Amendment Order was inserted keeping in mind the 
benefit of the existing sugar factories. In a situation like this, when such 
a factory itself gave 'no objection' certificate, thereby waived the 
requirement, the bonafides of the appellant cannot be doubted. We would 
like to reproduce here the following observations from the judgment in 
the case of R11jemlr11 Singh v. St11te of M;P. & Ors., (1996) 5 SCC 
460: 
"6. It has been held by a Constitution Bench of this Court in Har 
Silankar v. Dy. Excise and Taxation Commr. [(1975) 1 SCC 737 
: AIR 19J5 SC 1121] that: (SCC p. 748, para 22) 
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"[T]he writjurisdiction of High Courts under Article 226 of the 
Constitution is not intended to facilitate avoidance of obligations 
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voluntarily incurred." 
At the same time, it was .observed that the licensees are not 
precluded from seeking to enforce the statutory provisions 
governing the contract. It must, however, be remembP-red that 
we are dealing with pa.ties to a contract, which is a business 
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transaction, no doubt governed by statutory provisions. [Reference 
may also be made to the decision of this Court in Asstt. Excise 
Commr. v.
Issac Peter, (1994) 4 SCC 104.] While examining 
complaints of violation ofstatutory rules and conditions, it must be 
remembered that violation of each and every provision does not 
furnish a ground for the court to interfere. The provision may be 
F 
a directory one or a mandatory one. In the case of directory 
provisions, substantial compliance would be enough. Udess it is 
established that violation of a directory provision has resulted in 
loss and/or prejudice to the party, no interference is warranted. 
Even in the case of violation of a mandatory provision, interference 
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does not follow as a matter of course. A mandatory provision 
conceived in the interest of a party can be waived by that party, 
whereas a mandatory provision conceived in the interest of the 
public cannot be waived by him. In other words, wherever a 
complaint of violation of a mandatory provision is made, the court 
should enquire-in whose interest is the provision conceived. If 
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it is not conceived in the interest of the public, question of waiver 
and/or acquiescence may arise -
subject, of course, to the 
pleadings of the parties. This aspect has been dealt with 
elaborately by this Court in State Bank of Potia/a v. S.K. 
Sharma [( 1996) 3 SCC 364 : 1996 SCC (L&S) 717) and 
in Krisha11 Lalv. State ofJ&K[(1994) 4 sq:: 422: 1994 SCC 
(L&S) 885: (1994) 27 ATC 590) on the basis ofa large number 
of decisions on the subject. Though the said decisions were 
rendered with reference to the statutory rules and statutory 
provisions (besides the principles of natural justice) governing the 
disciplinary enquiries involving government servants and 
employees of statutory corporations, the principles adumbrated 
therein are of general application. It is necessary to keep these 
considerations in mind while deciding whether any interference is 
called for by the court -
whether under Article 226 or in a suit. 
The function of the court'is not a mechanical one. It is always a 
considered course of action." 
32. Another aspect which is to be borne in mind is that the purpose 
of distance requirement is thatthere is sufficient availability of sugarcane 
in the area so that it could easily cater to all the sugar factories. It is not 
disputed that appellant's factory has not adversely affected the utilisation 
of crushing capacity of either Mis. Doodhganga Sahakari factory or Ml 
s. Raibagh
Sahakari factory. It was pointed out by the learned counsel 
for the appellant during arguments, which fact was not denied by either 
side, that for last three years, Mis. Doodhganga Sahakari factory had 
crushed more sugarcane than their target. 
33. We, therefore, answer this issue by holding that in the facts of 
the present case, the necessity of distance requirement between Mis. 
Raibagh Sahakari factory and the appellant's factory as contained in 
Clause 6A was not attracted. 
Issue (g\ 
34. We have already highlighted various steps which were taken 
by the appellant for setting up its factory. The High Court has helJ that 
these were not "effective steps" in terms of Sugarcane Control 
Amendment Order. However, whether such steps wou Id constitute as 
'effective' steps as required by amended provisions contained in Clauses 
6A, 6B and 6C of the Sugarcane Control Order or not need not even be
SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 977 
LIMITED & ORS. [A. K. SIKRI, J.] 
gone into. Important aspects which need to be highlightec! are the 
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following: 
(i) !EM of the appellant was acknowledged on June 08, 2006. It 
had time till June 08, 20 I 0 to commence commercial production as per 
the Sugarcane Control Order. 
(ii) Extension was applied first on January 27, 2010 which was 
granted and thereafter second extension was granted by the Un ion of 
India till June, 2011. Commercial production commenced on May 25, 
2011. These extensions were given after considering replies of the 
appellant to the show cause notice that was issued. Even Government 
ofKarnataka had recommended the appellant's case for extension. State 
government had also highlighted the public purpose behind this project, 
which was for the welfare of the farmers as well. 
(iii) The appellant took various steps for setting up of this factory 
from time to time which have been taken note of above. These include 
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purchase of land, placement of firm order for plant and machinery and 
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payment of advance in that behalf, commencement of civil construction, 
taking term loans fi-om the Banks etc. 
(iv) These steps were taken along with due permissi011s which 
were required under different laws, duly accorded by the various 
Governmental Authorities, thus, showing its bona fides. 
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(v) The appellant has incurred an expenditure of Rs.299.05 crores 
as per its audited balance sheet for
2015-2016. The expenditure on land 
.---- ·and building as well as machinery is Rs.142.26 crores. 
(vi) The total loans for the running unit till year 2013 were to the 
tune of Rs. 23 7 crores. 
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(vii) The operational cost for running the factory in the year 2012-
2013 was Rs.149.29 crores. 
(viii) The appellant's unit is having 377 persons as employees on 
its rolls that are in regular employment. In addition, indirect employment 
of approximately 71 SO persons during each crushing season is facilitated 
by the running of the appellant's factory. 
(ix) The appellant has also set up a co-generation µ!ant for 
production of electricity which was initially 1 S megawatt and, at present, 
is giving supply of3 7 megawatt electricity. 
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(x) There is ample sugarcane supply in the State of Karnataka 
and, in particular, in Raibagh region and, therefore, there is no adverse 
effect on the operation of any other sugar mills including M/s. Raibagh 
Sahakari and Mis. Doodhganga Sahakari 
35. When we keep in mind all the aforesaid factors cumulatively, 
we see that no purpose is going to be served in getting the unit of the 
appellant closed. On the contrary, public purpose demands that the 
appellant's factory remain in operation and continue to function. 
36. We have already highlighted the factors which weigh in favour 
of continuing the operations of the appellant's factory. Apart from 
equitable considerations on the side of the appellant, there are certain 
economic factors as well which tilt the balance totally in favour of the 
appellant herein. These include expenditure of approximately Rs.300 
crores by the appellant in establishing the factory (including expenditure 
on land and building to the tune ofRs.142.26 crores); loans raised to the· 
tune of Rs.237 crores; operational cost of Rs.150 crores; generation of 
employment of377 persons on regular basis and indirect employment of 
more than 7000 persons; and setting up of co-generation plaut for 
production of electricity which is giving supply of37 mw of electricity. 
These factors, particularly, bank loans, employment, generation and 
production at the factory serve useful public
purpose and such economic 
considerations cannot be overlooked, in the context where there is hardly 
any statutory violation. 
37. It has been recognised for quite some time now that law is an 
inter disciplinary subject where interface between law and other sciences 
(social sciences as well as natural/physical sciences) come into play and 
the impact of other disciplines of law is to be necessarily kept in mind 
while taking a decision (of course, within the parameters of legal 
provisions). Interface between law and economics is much more relevant 
in today's time when the country has ushered into the era of economic 
liberalization, which is also termed as 'globalisation' of economy. India 
is on the road of economic growth. It has been a developing economy 
for number of decades and all efforts are made, at all levels, to ensure 
that it becomes a fully developed economy. Various measures are taken 
in this behalf by the policy makers. The judicial wing, while undertaking 
the task of perfonning its judicial function, is also required to perform its 
role in this direction. It calls for an economic analysis of law approach,
SH!VASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR. 979 
LIMITED & ORS. [A. K. SIKRI, J.] 
most commonly referred to as 'Law and Economics' .1 In fact, i~ certain 
A 
branches of law there is a direct impact of economics and economic 
considerations play predominant role, which are even recognised as legaf 
1 Richard A. Posner in his book 'Frontiers o.f legal Theory·' explains this concept as 
follows: 
Economic analysis of law has heuristic, descriptive, and normative aspects. As 
a heuristic, it seeks to display underlying unities in legal doctrines and 
institutions; in its descriptive mode, it seeks to identify the econon1i~ logic and 
effects of doctrines and institutions and the economic causes of legal char:ige; in 
its nonnati\:e aspect it advises judges and other policy1nakers or. the n1ost 
efficient methods of regulating conduct through la\\1• The ra.nge of its subject 
matter has becon1e \\"ide. ihdeed all-enco1npassing. Exploiting advances in the 
economics of non market behavior. economic analysis of \a\r has expanded far 
beyond its original focus on antitrust. taxation. public utility regulation, 
corporate finance, and other are as of explicitly econo1nic regulation. (And 
\\"ithin that do1nain. it has expanded to include such fields as property and 
contract la\Y). 1"he :.ne\r'· economic analysis of la,,· cn1braces such non market 
or quasi-nonmarket. fields of la\\· as tort la\\·. family la\\·. cri1ninal la\v. free. 
speech, procedure, legislation, public
international law, the Ja,v of intellectual 
property. the rules governing the trial and appellate process, environmental 
law, the administrative process, the regulation of health and safety, the laws 
forbidding discrin1ination in employn1ent, and social norms vic\red as a source 
of. an obstacle to. and a substitute for formal la\\'." 
Posner also mentioned that this interface beh,·een La,,· and Economics might 
grandly be called 'Economic Theory ofLa\v', which is built on a pioneering article by 
Ronald Coase {R.H. Coase. ·The Problem of Social Cose 3 Journal of Law and 
Economics .1. ( 1960)}: 
.. The "Coase Thcorc1n·· holds that \\"here murket transaction costs arc zero. the 
law's initial assignment of rights is irrelevant to etlicicncy, since if the assignn1ent 
is inetlicient the parties \viii rectify it by a corrective transaction. There are 
two hnporlant corollaries. The first is that the la\V, to the extent interested in 
promoting ccono1nic etliClency. should try to n1inimizc transaction costs. for 
example by defining property rights clearly, by making them readily tr;nsforable. 
and by creating cheap and eflective remedies for breach of contract ... 
The second corollary of the Coase Theorem is that \\·here. despite the law·s 
best efforts, n1arket transaction costs remain high. the law should simulate the 
market's allocation of resources by assigning property rights to the highest· 
valued uSers. An example is the fair-use doctrine of copyright Ja,v.
"·h'ich 
allo,vs \\Titers to publish short quotations from a copyrighted ,,·ork 'rithout 
negotiating \Vith the copyright holder. The costs of such negotiations \\"ould 
usually be prohibitive; if they \Vere not prohibitive. the usual resul~ \Vould be 
an agreement to permit the quotation. and so the doctrine of fair use brings 
about the result that the market would bring about if market transactions were 
feasible." 
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principles. Monopoly laws (JJOpularly known as 'Antitrust Laws' in USA) 
have been transformed by economics. The issues arising in competition 
laws (which has replaced monopoly laws) are decided primarily on 
economic analysis of various provisions of the Competition Commission 
Act. Similar approach is to be necessarily adopted while interpr~ting 
bankruptcy laws or even matters relating to corporate finance, etc. The 
impress of economics is strong while examining various facets of the 
issues arising under the aforesaid laws. In fact, economic evidence 
plays a big role even while deciding environmental issues. There is a 
growing role of economics in contract, labour, tax, corporate and other 
laws. Courts are increasingly receptive to economic arguments while 
deciding these issues. In such an environment it becomes the bounden 
duty of the Court to have the economic analysis and economic impact of 
its decisions. We may hasten to add that it is by no means suggested 
that while taking into account these considerations specific provisions of 
law are to be ignored. First duty of the Court is to decide the case by 
applying the statutory provisions. However, on the application of law 
and while interpreting a particular provision, economic impact/effect of 
a decision, wherever warranted, has to be kept in mind. Likewise, in a 
situation where two views are possible or wherever there is a discretion
given to the Court by law, the Court needs to lean in favour of a part;cular 
view which subserves the economic interest of the nation. Conversely, 
the Court needs to avoid that particular outcome which has a potential to 
create an adverse affect on employment, growth of infrastructure or 
economy or the revenue of the State. It is in this context that economic 
analysis of the impact of the decision becomes imperative'. At times, 
this Court has laid emphasis on this aspect, al be it in other context. For 
example, in Ri1ullluf l11tem11/io1illf Limited v. I. V.R. Com·tructio11 Ltd. 
& Ors., (1999) 1 SCC 492, this Court cautioned the High Courts not to 
easily grant interim stay while dealing with the writ petitions where 
challenge is to award of tender by the Government in favour of a party, 
highlighting the fact that even commercial transactions of State or public 
body may involve element of public law or public interest and grant of 
such interim stay may delay the approach, and in turn escalate the cost 
thereof, which may not be in public interest. Relevant paragraphs from 
2 In the jurisprudence of the Economic Approach to Law, there are various theories 
propounded by the jurists, e.g., The Positive Theory or Nonnative Theory etc. Ho\vever, 
here. \Ve are li1niting the discussion to that facet which relates to economic i1npact of a 
judicial decision.
SHIVAS.HAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 981 
LIMITED & ORS. [A. K. SlKRI, J.] 
the said judgment read as under: 
"11. When a writ petition is filed in the High Court challenging the 
award of a contract by a public authority or the State, the court 
must be satisfied that there is some element of public interest 
involved in entertaining such a petition. If, for example, the dispute 
is purely between two tenderers, the court must be very careful 
to see ifthere is any element of public interest involved in the 
litigation. A mere difference in the prices offered by the two 
tenderers may or may not be decisive in deciding whether any 
public interest is involved in intervening in such a commercial 
transaction. It is important to bear in mind that by court intervention, 
the proposed project may be considerably delayed thus escalating 
the cost far more than any saving which the court would ultimately 
effect in public money by deciding the dispute in favour of one 
tenderer or the other tenderer. Therefore, unless the cou1t is 
satisfied that there is a substantial amount of public interest, or 
the transaction is entered into mala fide, the court sh.:mld not 
intervene under Article 226 in disputes between two rival 
tenderers 
[Emphasis supplied} 
12. Wh· 
.led as a public interest litigation challenging 
the awaru 
Jact by the 'State or any public body to a 
pa•· culartenderer, the cou1t must satisfy itself that the party which 
hi· orought the litigation is
litigating bona fide for public good. 
The public interest litigation should not be merely a cloak for 
attaining private ends of a third party or of the party bringing the 
petition. The court can examine the previous record of public 
service rendered by the organisation bringing public interest 
litigation. Even when a public interest litigation is entertained, the 
court must be careful to weigh conflicting public interests before 
intervening. Intervention by the comt may ultimately result in delay 
in the execution of the project. The obvious consequence of such 
delay is price escalation. If any retendering is prescribed, cost of 
the projectcan escalate substantially. What is more impmtant is 
that ultimately the public would have to pay a much higher price 
in the form of delay in the commissioning of the projec' and the 
consequent delay in the contemplated public service becoming 
available to the public. If it is a power project which is thus·delayed, 
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the public may lose substantially because of shortage in electricity 
supply and the consequent obstruction in industrial development. 
If the project is for the construction of a road or an irrigation 
canal, the delay in transportation facility becoming available or 
the delay in water supply for agriculture being available, can be a 
substantial setback to the country's.economic development. Where 
the decision has been taken bona fide and a choice has been 
exercised on legitimate considerations and not arbitrarily, there is 
no reason why the court should entertain a petition under Article 
226. 
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18. The same considerations must weigh with the court when 
interim orders are passed in such petitions. The party at whose 
instance interim orders are obtained has to be made accountable 
for the consequences of the interim order. The interim order could 
delay the project, jettison finely worked financial arrangements 
and escalate costs. Hence the petitioner asking for interim orders 
in appropriate cases should be asked to provide security fer any 
increase in cost as a result of such delay or. any damages suffered 
by the opposite party in consequence of an interim order. 
Otherwise public detriment may outweigh public benefit in granting 
such interim orders. Stay order or injunction order, if issued, must 
be moulded to provide for restitution. 
xx 
xx 
xx 
24. Dealing with interim orders, this
Court observed 
in CCE v. Dunlop India Ltd. [( 1985) l SCC 260] (SCR 19(1 at p. 
F 
196) that an interim order should not be granted without considering 
the balance of convenience, the public interest involved and the 
financial impact of an interim order. Similarly, in Ramniklal N. 
Bhutto v. State of Maharashtra [(1997) I SCC 134] the Court 
said that while granting a stay, the court should arrive at a proper 
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balancing of competing interests and grant a stay only when there 
is an overwhelming public interest in granting it, as again~t the 
public detriment which may be caused by granting a stay. 
Therefore, in granting an injunction or stay order against the award 
of a contract by the Government or a government agency, the 
court has to satisfy itself that the public interest in holding up the 
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SHIVASHAKTI SUGARS LIMITED v. SHREE RENUKA SUGAR 983 
LIMITED & ORS. [A. K. SIKRI, J.] 
project far outweighs the public interest in carrying it oot within a 
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reasonable time. The comt must also take into account the cost 
involved in staying the project and whether the public would stand 
to benefit by incurring such cost." 
[Emphasis supplied] · 
38. Even in those cases where economic interest competes with 
the rights of other persons, need is to strike a balance between the two 
competing interests and have a balanced approach. That is the aspect 
which has been duly taken care of in the instant case, as would be 
discernible from the concluding paragraph ofthisjudgment. 
39. Although law and economics traces back to the period of 
Jeremy Bentham', i.e. 18'" century, in the last few decades, interplay 
between law and economics has gained momentum throughout the world. 
Indian judiciary has resorted to economic analysis of law on ad hoc 
basis. Time has come to consider the inter-discipline between law and 
economics as a profound movement on sustainable basis. These are the 
additional relevant considerations which have weighed in our mind in 
adopting a particular course of action in the instant case. 
40. Even if we find some technical violation, the aforesaid factors 
demand this Court to exercise its power under Article 142 of the 
Constitution oflndia. This Court would be inclined to do so in the instant 
case which is a fit case for exercise of such powers
keeping in view the 
equitable considerations and moulding the relief. 
41. Tl1c learned senior counsel for the appellant had made a very 
1;.,;, sugg.,otiun that cwn if there is a shortage of sugarcane (though it is 
not oo), sugarcane from the 14 villages originally assigned to respondent 
No. I and now with the appellant can be re-allotted to respondent No. I. 
Having regard to this submission, we dispose of these appeals by setting 
aside the directions contained in the judgment of the High Court and 
allowing the appellant's factory to continue its operation subject to the 
condition that 14 villages which were originally assigned to re>pondent 
No.1 would be re-allotted to it after taking these villages from the 
appellant. 
Appeals allowed in the aforesaid terms. No order as to costs. 
Nidhi Jain 
Appeals allowed. 
3 L1tilitarian 771eo1y. \\·hich is essentially econo1nic theory 
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