Case: State of Uttar Pradesh &amp; Others Vs. Mawana Sugars Limited

4. The pleaded facts in brief, sans the inessentials need be adverted to for the required grip of the issues. The respondent company has three sugar mills in the name and style of "Mawana Sugar Works, Mawana, Distt. Meerut," "Nanglamnal Sugar Complex, Nanglamal, Distt. 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 aAdmittedly 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 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 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, for the Molasses Yearvide its communication No.2015 dated 24.6.2016 issued the "Molasses Policy" (for short also "Policy") for the said year. The Policy provided for a reservation of 25% 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% would apply to the balance stock of molasses left over after its captive consumption for its distillery, as propounded in Dhampur Sugar Mills Ltd. v. State of U.P. and others, (2007) 8 SCC 338  , the assertion 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 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 Yearthe balance stock of molasses left over after such captive 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 Yearthe production 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 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 would be utilised in its distilleries and no balance stock would be left for reservation or supply to theliquor manufacturers. 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 molasses produced during the Molasses Yearwould 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 Yearand thereby for all practical purposes has rejected the request made.9. The appellants in their pleadings in reply, while endorsing the Policy for the yearand the reservation of 25% of the molasses produced during that year, did inter alia underline as well that in terms of the Act, the State Government was authorised and empowered to direct/regulate, control, storage, supply, gradation of price of molasses. 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 yearIt underlined that the Minimum Guarantee Quantity of country liquor in the financial yearwas 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 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 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 liberty 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 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 from6, 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 Dhampur Sugar Mills, which, as would unfold hereinafter, was founded on the policy distinctly different from one, formulated for the Molasses YearBe 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 requiring compliance by the respondent of the Policy, as devoid of reasons. It perceived the stand of the appellants, to be that the entire excess 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 Dhampur Sugar Mills, that the respondent was required to reserve 25% only of the excess stock left over after its captive consumption. It noted the figures representing the opening stock, production of molasses and the captive consumption thereof for the Molasses Yearwhich was based on the actual consumption in the previous Molasses Yearand calculated the balance stock for the Molasses Yearto be 15,994 M.T. and held that the respondent would be required to reserve 25% thereof only for supply to 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 YearAccordingly, the respondent was required to retain 25% of its balance stock, after its 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

Court's reasoning:
13. The disparate pleadings and the contrasting assertions have 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 Mills, apt it would be at the outset to advert thereto, so as to clear the deck for the ultimatereiterate, 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 respondent and other sugar mills equally situated. To address the issue and having regard to theThe records testify that the said Policywas published by a Circular/Communicationin 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.As all the clauses would demonstrate, reference of paragraphs 46 and 47 of the decision in Dhampur Sugar Mills 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.This is both in text and content totally dissimilar to the above excerpt extracted from the Policy for the Molasses YearWhereas 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 contradistinction, in the Policy for the Molasses Yearthe 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 Policy 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, (as referred to the Policy) which in its reported version in (2007) 8 SCC 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 at all on the computation of balance stock as envisaged in the Policy and 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 Yearwas based on the decision 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 proceeding on that premise and issuing the consequential 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 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 25% of the balance stock under all situations is visibly flawed and fallacious. The measure of the captive consumption for the Molasses Yearon the basis of such utilization for the Molasses Yearin absence of any overwhelming material to the contrary, also cannot be faulted with.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 Yearand 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.