Case: M/S. Dhampur Sugar Mills Ltd Vs. State Of U.P.

4. The appellant-M/s. Dhampur Sugar Mills Ltd. (Company for short) is a Public Limited Company incorporated under the Companies Act, 1956 having its registered office at Dhampur (Bijnor). The appellant has sugar mill in the State of Uttar Pradesh and has also a distillery. The distillery manufactures ethyl alcohol, used for blending of petrol, manufacture of chemicals and rectified spirit for medicines. It is also having a similar business at Asmouli, District Moradabad, Mansurpur, District Muzaffarnagar and Rozagaon, District Barabanki The writ petitioner approached the High Court by invoking Article 226 of the Constitution against the respondents for issuance of appropriate writ, direction or order quashing certain Government Orders said to have been passed by the Authorities under the Uttar Pradesh Sheera Niyantran Adhiniyam, 1964 [Act XXIV of 1964] (hereinafter referred to as the Act) directing the writ-petitioner to supply 20% of the molasses produced by the sugar mills for manufacturing country made liquor by distilleries for the financial years 2003-04 and 2004-05. The writ petitioner also challenged consequential action of issuance of show cause notices as to why it should not be prosecuted for committing offences punishable under the Act since it has not complied with the orders issued by the Authorities and has not supplied 20% molasses for manufacturing country liquor. The main challenge of the writ petitioner was that though the Company was producing molasses, the entire production was required by the Company itself which was used for captive consumption and even that was not sufficient. The Company had, therefore, obtained permission from the Government for import of molasses from other States as also other Countries. Since the writ petitioner did not have balance or extra stock of molasses for being supplied to distilleries for manufacturing country-made liquor, the Authorities could not compel the writ petitioner to supply molasses as directed in various Government Orders and Letters. Such action was improper, illegal, arbitrary and unreasonable, inconsistent with the provisions of the Act as also violative of Articles 14 and 19(1)(g) of the Constitution. The action was also against public policy reflected in Article 47 of the Constitution. It was contended that since the above directives could not have been issued by the Authorities, issuance of show cause notices as to why the writ petitioner should not be prosecuted also were not legal and the prosecution should be quashed. It was also the case of the writ petitioner that the State Government ought to have constituted Advisory Committee under Section 3 of the Act5. The stand of the Government before the High Court was that in accordance with the provisions of the Act and the Uttar Pradesh Sheera Niiyantran Niyamavali, 1974 (hereinafter referred to as the Rules), it was open to the Authorities to ask the writ petitioner to supply 20% molasses for the purpose of manufacturing country liquor. As the said action was in consonance with law, the Company was bound to supply 20% molasses for the said purpose and the action could not be termed as illegal or unlawful6. It was also contended by the respondents that an alternative and equally efficacious remedy of filing an appeal under Section 9 of the Act was available to the Company and hence writ petition was not maintainable8. The High Court, after hearing the parties, held that preliminary objection raised by the respondents was not well-founded. Considering the totality of facts and circumstances and the decisions taken by the respondents, the High Court held that approaching the Appellate Authority would be a futile attempt. The High Court, considering various decisions of this Court on the point, held that it would not be justified in dismissing the petition on the ground of alternative remedy and the said objection was not well-founded9. The Court ruled that apart from the fact that Article 47 of the Constitution could not be enforced by a Court of Law, the point no longer survived in the light of decision of the Apex Court in Khoday Distilleries Ltd. Section 3 of the Act, according to the High Court, was only directory and if Advisory Committee was not constituted by the State, the powers under the Act could be exercised by the Controller appointed by the State10. On merits, the Court held that the reservation for 20% of molasses and directive issued to the writ petitioner to supply such stock for manufacturing country liquor was neither contrary to law nor against public policy. The order, therefore, could have been issued by the Authorities as it was open to the Authorities to ask for 20% molasses from the writ petitioner for manufacturing country liquor. The Company was bound to supply the stock and as it was not done, the Authorities were right in taking appropriate action in accordance with law. Accordingly, the High Court dismissed the writ petition4. The appellant-M/s. Dhampur Sugar Mills Ltd. (Company for short) is a Public Limited Company incorporated under the Companies Act, 1956 having its registered office at Dhampur (Bijnor). The appellant has sugar mill in the State of Uttar Pradesh and has also a distillery. The distillery manufactures ethyl alcohol, used for blending of petrol, manufacture of chemicals and rectified spirit for medicines. It is also having a similar business at Asmouli, District Moradabad, Mansurpur, District Muzaffarnagar and Rozagaon, District Barabanki The writ petitioner approached the High Court by invoking Article 226 of the Constitution against the respondents for issuance of appropriate writ, direction or order quashing certain Government Orders said to have been passed by the Authorities under the Uttar Pradesh Sheera Niyantran Adhiniyam, 1964 [Act XXIV of 1964] (hereinafter referred to as the Act) directing the writ-petitioner to supply 20% of the molasses produced by the sugar mills for manufacturing country made liquor by distilleries for the financial years 2003-04 and 2004-05. The writ petitioner also challenged consequential action of issuance of show cause notices as to why it should not be prosecuted for committing offences punishable under the Act since it has not complied with the orders issued by the Authorities and has not supplied 20% molasses for manufacturing country liquor. The main challenge of the writ petitioner was that though the Company was producing molasses, the entire production was required by the Company itself which was used for captive consumption and even that was not sufficient. The Company had, therefore, obtained permission from the Government for import of molasses from other States as also other Countries. Since the writ petitioner did not have balance or extra stock of molasses for being supplied to distilleries for manufacturing country-made liquor, the Authorities could not compel the writ petitioner to supply molasses as directed in various Government Orders and Letters. Such action was improper, illegal, arbitrary and unreasonable, inconsistent with the provisions of the Act as also violative of Articles 14 and 19(1)(g) of the Constitution. The action was also against public policy reflected in Article 47 of the Constitution. It was contended that since the above directives could not have been issued by the Authorities, issuance of show cause notices as to why the writ petitioner should not be prosecuted also were not legal and the prosecution should be quashed. It was also the case of the writ petitioner that the State Government ought to have constituted Advisory Committee under Section 3 of the Act5. The stand of the Government before the High Court was that in accordance with the provisions of the Act and the Uttar Pradesh Sheera Niiyantran Niyamavali, 1974 (hereinafter referred to as the Rules), it was open to the Authorities to ask the writ petitioner to supply 20% molasses for the purpose of manufacturing country liquor. As the said action was in consonance with law, the Company was bound to supply 20% molasses for the said purpose and the action could not be termed as illegal or unlawful6. It was also contended by the respondents that an alternative and equally efficacious remedy of filing an appeal under Section 9 of the Act was available to the Company and hence writ petition was not maintainable8. The High Court, after hearing the parties, held that preliminary objection raised by the respondents was not well-founded. Considering the totality of facts and circumstances and the decisions taken by the respondents, the High Court held that approaching the Appellate Authority would be a futile attempt. The High Court, considering various decisions of this Court on the point, held that it would not be justified in dismissing the petition on the ground of alternative remedy and the said objection was not well-founded9. The Court ruled that apart from the fact that Article 47 of the Constitution could not be enforced by a Court of Law, the point no longer survived in the light of decision of the Apex Court in Khoday Distilleries Ltd. Section 3 of the Act, according to the High Court, was only directory and if Advisory Committee was not constituted by the State, the powers under the Act could be exercised by the Controller appointed by the State10. On merits, the Court held that the reservation for 20% of molasses and directive issued to the writ petitioner to supply such stock for manufacturing country liquor was neither contrary to law nor against public policy. The order, therefore, could have been issued by the Authorities as it was open to the Authorities to ask for 20% molasses from the writ petitioner for manufacturing country liquor. The Company was bound to supply the stock and as it was not done, the Authorities were right in taking appropriate action in accordance with law. Accordingly, the High Court dismissed the writ petition11. On May 2, 2005, notice was issued by this Court. The matter appeared on Board thereafter from time to time and ultimately on March 2, 2007, the Registry was directed to place the matter for final disposal on a non-miscellaneous day. That is how the matter has been placed before us.

Court's reasoning:
19. The learned counsel for the writ petitioner, in our opinion, is right in contending that the said order applies only to balance stock (Avshesh staak). According to the High Court, 20% molasses must be reserved by each and every sugar mill for manufacturing country liquor notwithstanding whether there is balance stock or not. In other words, the High Court held that 20% molasses must be reserved by every sugar mill for the purpose of manufacturing country liquor. If such sugar mill is having facility of manufacturing country liquor, it should utilize the said stock for the said purpose, otherwise it should supply to the Authorities20. In our opinion, however, clause (3) applies only to excess stock of molasses, that is, molasses which is in excess of and not used for captive consumption by sugar factory and is thus balance stock. It is the assertion of the writ petitioner that the Company has no excess stock of molasses. Not only that, but it has to import molasses from other sources even for its own requirement for manufacturing industrial alcohol and such permission has been granted by the Central Government as well as by the State Government. If it is so, the case does not fall within the mischief of clause (3) and said clause cannot be pressed in service by the Authorities. The High Court, in our opinion, was not right in holding that all sugar mills were bound to supply 20% molasses to the Authorities under clause (3) of the Government Order dated June 9, 2004 irrespective of stock possessed. Only on that ground, the appeal deserves to be allowed21. So far as the submission of the learned counsel as to Article 47 of the Constitution in Part IV comprising of Directive Principles of State Policy is concerned, in our opinion, on the facts and in the circumstances, it is not necessary to express any opinion one way or the other and we refrain from doing so28. Reading the substantive provisions in the Act as also subordinate legislation by way of Rules, there is no doubt in our minds that the submission of the learned counsel for the writ petitioner that such a Committee ought to have been constituted by the State is well-founded and must be upheld. The High Court dealt with the submission of the writ petitioner but did not accept it observing that the Legislature had used the expression may and not shall in Section 3 of the Act. The Court ruled that the provision was merely directory and not mandatory29. We are unable to subscribe to the above view. In our judgment, mere use of word may or shall is not conclusive. The question whether a particular provision of a statute is directory or mandatory cannot be resolved by laying down any general rule of universal application. Such controversy has to be decided by ascertaining the intention of the Legislature and not by looking at the language in which the provision is clothed. And for finding out the legislative intent, the Court must examine the scheme of the Act, purpose and object underlying the provision, consequences likely to ensue or inconvenience likely to result if the provision is read one way or the other and many more considerations relevant to the issue5. In the case on hand, considering the legislative scheme as also Rules and particularly Rules relating to constitution of Committee, namely, the U.P. Molasses Advisory Committee Rules, 1965, in our opinion, investment of power in the State Government is not merely enabling or discretionary. It is obligatory on the Government to constitute a Committee to carry out the purpose and object of the Act. The Committee has to perform an important role of advising the State Government on matters relating to the control of storage, preservation, gradation, price, supply and disposal of molasses. The constitution of the Committee, as envisaged by Rule 3 of the 1965 Rules clearly shows the representation of various groups and interests likely to be affected. Rule 11 requires the Chairman (Controller of Molasses) to give due consideration of the resolutions passed by the Committee and forward it to the State Government for orders together with a copy of the proceedings and his recommendations. In our considered opinion, it is not open to the State Government to ignore this salutary provision taking specious plea that the provision relating to constitution of Committee is enabling, directory or discretionary and State, therefore, is not obliged to constitute such Committee. In our judgment, the High Court was not right in upholding the argument of the respondents. We, therefore, hold that in accordance with the provisions of 1964 Act, the Rules framed thereunder as also under 1965 Rules, it is the duty of the State Government to constitute Advisory Committee. We accordingly direct the State of Uttar Pradesh to constitute Advisory Committee as expeditiously as possible46. For the foregoing reasons, in our opinion, the appeal deserves to be allowed and the order of the High Court deserves to be set aside. It is, accordingly held that the directive issued by the respondents would not apply in case there is no balance stock of molasses with any sugar mill. The respondent-authorities have no right to compel such sugar mills to supply 20% molasses for the purpose of manufacturing country liquorSo far as the constitutional validity of the Act is concerned, it is rightly not challenged by the writ petitioner since the point is concluded by a decision of this Court in SIEL Ltd. decided in 1998. It was held by this Court that the Act was within the legislative competence of the State and the State Act was not inconsistent with the Industries (Development and Regulation) Act, 1951, i.e. Central Act. But even otherwise, the U.P. Act having received the assent of the President as required by Article 254(2) of the Constitution, would operate19. The learned counsel for the writ petitioner, in our opinion, is right in contending that the said order applies only to balance stock (Avshesh staak). According to the High Court, 20% molasses must be reserved by each and every sugar mill for manufacturing country liquor notwithstanding whether there is balance stock or not. In other words, the High Court held that 20% molasses must be reserved by every sugar mill for the purpose of manufacturing country liquor. If such sugar mill is having facility of manufacturing country liquor, it should utilize the said stock for the said purpose, otherwise it should supply to the Authorities20. In our opinion, however, clause (3) applies only to excess stock of molasses, that is, molasses which is in excess of and not used for captive consumption by sugar factory and is thus balance stock. It is the assertion of the writ petitioner that the Company has no excess stock of molasses. Not only that, but it has to import molasses from other sources even for its own requirement for manufacturing industrial alcohol and such permission has been granted by the Central Government as well as by the State Government. If it is so, the case does not fall within the mischief of clause (3) and said clause cannot be pressed in service by the Authorities. The High Court, in our opinion, was not right in holding that all sugar mills were bound to supply 20% molasses to the Authorities under clause (3) of the Government Order dated June 9, 2004 irrespective of stock possessed. Only on that ground, the appeal deserves to be allowed21. So far as the submission of the learned counsel as to Article 47 of the Constitution in Part IV comprising of Directive Principles of State Policy is concerned, in our opinion, on the facts and in the circumstances, it is not necessary to express any opinion one way or the other and we refrain from doing so28. Reading the substantive provisions in the Act as also subordinate legislation by way of Rules, there is no doubt in our minds that the submission of the learned counsel for the writ petitioner that such a Committee ought to have been constituted by the State is well-founded and must be upheld. The High Court dealt with the submission of the writ petitioner but did not accept it observing that the Legislature had used the expression may and not shall in Section 3 of the Act. The Court ruled that the provision was merely directory and not mandatory29. We are unable to subscribe to the above view. In our judgment, mere use of word may or shall is not conclusive. The question whether a particular provision of a statute is directory or mandatory cannot be resolved by laying down any general rule of universal application. Such controversy has to be decided by ascertaining the intention of the Legislature and not by looking at the language in which the provision is clothed. And for finding out the legislative intent, the Court must examine the scheme of the Act, purpose and object underlying the provision, consequences likely to ensue or inconvenience likely to result if the provision is read one way or the other and many more considerations relevant to the issue5. In the case on hand, considering the legislative scheme as also Rules and particularly Rules relating to constitution of Committee, namely, the U.P. Molasses Advisory Committee Rules, 1965, in our opinion, investment of power in the State Government is not merely enabling or discretionary. It is obligatory on the Government to constitute a Committee to carry out the purpose and object of the Act. The Committee has to perform an important role of advising the State Government on matters relating to the control of storage, preservation, gradation, price, supply and disposal of molasses. The constitution of the Committee, as envisaged by Rule 3 of the 1965 Rules clearly shows the representation of various groups and interests likely to be affected. Rule 11 requires the Chairman (Controller of Molasses) to give due consideration of the resolutions passed by the Committee and forward it to the State Government for orders together with a copy of the proceedings and his recommendations. In our considered opinion, it is not open to the State Government to ignore this salutary provision taking specious plea that the provision relating to constitution of Committee is enabling, directory or discretionary and State, therefore, is not obliged to constitute such Committee. In our judgment, the High Court was not right in upholding the argument of the respondents. We, therefore, hold that in accordance with the provisions of 1964 Act, the Rules framed thereunder as also under 1965 Rules, it is the duty of the State Government to constitute Advisory Committee. We accordingly direct the State of Uttar Pradesh to constitute Advisory Committee as expeditiously as possible46. For the foregoing reasons, in our opinion, the appeal deserves to be allowed and the order of the High Court deserves to be set aside. It is, accordingly held that the directive issued by the respondents would not apply in case there is no balance stock of molasses with any sugar mill. The respondent-authorities have no right to compel such sugar mills to supply 20% molasses for the purpose of manufacturing country liquor47. We may, however, make one thing clear. As seen above, the assertion of the appellant was that it has no balance stock and even for its own requirement, it has to import molasses. On the other hand, the allegation of the respondents is that excess and balance molasses was available with the appellant which it had sold in open market. The High Court, in the impugned order has not decided the question finally. Quoting certain paragraphs from the writ-petition, the High Court observed that there was no proper pleading and as such, the Court was not in a position to go into the question. It is, therefore, made clear that it is open to the respondents to take appropriate action in accordance with law on the basis of our decision and observations made in this judgment.