STATE OF MAHARASHTRA AND ANR.

A v.

POOiA BREW-CHEM INDUSTRIES P. LTD. AND ANR.

SEPTEMBER 15, 1995

[K. RAMASWAMY AND B.L. HANSARIA, JJ.) B

Bombay Denatured Spilit Rules 1959 :

R. 26--Grant of Licenc, e-Company's application f oeld, though it is open to subordinate:.' of the Govemment to examine desirability to grant C licence, but auth01ity concerned has necessarily to put on notice the adverse mate1ial in its possession and to supply necessary copies thereof to the company alongwith its prim a f acie view thereon so that the Company may have an opportunity to justify its claim.

Constitution of India 1950 : D

Article 226--Company's application for grant of licence under r.26 of Bombay Denatured Spirit Rules, 1959-State authorities examining desirability of granting licence-Meanwhile company filed writ petition before High Court which directed State to issue licence-Held, appropriate authority E is entitled to examine desirability to grant licence, and on considering relevant materials supplied by company justifying its claim, it is open to the authority to refuse or to grant licence for reasons to be recorded-Since this exercise had not been peifomted High Court was not justified in directing the State to issue licence.

The respondent company applied to the Commissioner, Prohibition

and Excise for grant of permit tQ manufacture Ethyle Acetate. Later, the Company intended to manufacture Diethyle Oxalate and Diethyl Phthalage. The State on 4.4.1991 assured the respondent company of supply of alcohol quota of 14.40 lakh bulk litres, for one year, provided that if the company did not start manufacturing the products, assurance G for alcohol quota would be cancelled The Company by its letter 1. 4. 1994 intimated the Commissioner that it had completed the project to manufacture the products and was ready to start the production, and requested him to issue the licence under r.26 of the Bombay Denatured Spirit Rules,

1959. Since licence was not ganted, the company filed a writ petition H 739

A before the High Court praying for a direction to the State to issue to the Company D, S.V. Liceni::e under r.26 of the Rules and also to release 14.40 lakh bulk litres of alcohol/specially denatured spirit annually. The High Court allowed the Writ Petition. Aggrieved, the State Government filed the appeal by special leave.

B It was contended on behalf of the State that the order of the High Court was not sustainable in as much as though the Government had decided to grant D.S.V. Licence but subsequently it was noticed that some sensitive materials were required to be examined and the matter was being examined, but meanwhile the High Court, issued the direction; that unless C the licence was issued under r .26 of the Rules, the Company was not entitled to start manufacturing ; and that with effect from 21.6.1993, due to decontrol of allocation and supply from the Government, it had lost control over the allotment and the respondent-Company was free to approach the appropriate authority for supply of alcohol.

D Allowing the appeal and setting aside the order of the High Court, this Court

HELD : 1.1. While considering the request of the respondent-company, for grant of licence under r.26 of the Bombay Denatured Spirit E Rules, 1959, if certain material as regards the desirability to grant the licence is to be examined by the subordinates of the Government, then necessarily the concerned authority has to put on notice as to what adverse material is in its possession and it has to supply necessary copies thereof and also their prima facie views on that material so that the respondentcompany would have an opportunity to place all the material to justify its F seeking for the licence. Thereaflt!r, it is open to the appropriate authority to consider and refuse or grant the licence for the reasons to be mentioned in the order. Since this exercise had not been performed, the High Court was not justified in directing the appellants to issue the licence. (744-E-F]

G 1.2. The State should issue notice to the respondent- Company on grounds on which they propose to take action in case they feel that it is not feasible to issue the licence to the respondent-Company, together with the material in their custody on the basis of which they formed that opinion. If it is felt that certain material is confidential and supply of copies thereof is not advisable in the expediency of public administration, the competent H authority is at liberty to allow inspection of such material by counsel for

STATE v. POOJABREW-CHEMINDS.P.LTD. 741

the respondentcompany. On receipt of the response and other material in A support of the claim of the Company, the licensing authority would consider the case and pass appropriate order. [744-G, 745-B, 744-H]

2. After June 21, 1993, the Government has no obligation to make any allotment of alcohol and supply the same to any manufacturer since after the decontrol, it is free for all to purchase alcohol wherever it is B available. (744-B]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8439 of 1995.

From the Judgment and Order dated 31.1.95 of the Bombay High Court in W.P. No. 55 of 1995.

S.K. Dholakia, S. M. Jadhav and A.S. Bhasme for the Appellants.

Dr. A.M. Singhvi, Krishna Agarwal, Bharat Sangal and Ms. Monika Kanwar, for the Respondents.

The following Order of the Court was delivered :

Leave granted.

The appeal by special leave arises from the order dated January 31, 1995 of the Division Bench of the Bombay High Court. The High Court in the impugned order granted relief as under :

"5. For the reasons aforesaid, the Writ Petition succeeds and is allowed. Rule is made absolute in terms of prayer clause (a). The annual alcohol quota of 14.40 lakh bulk litres be released to the 1st petitioner, on compliance of the statutory provisions, within two weeks."

The-prayer in clause (a) read thus :

"This Hon'ble Court be pleased to issue a writ of mandamus or a G writ in the nature of mandamus or any other appropriate writ, order or direction under Article 226 of the Constitution of India directing the Respondents to forthwith issue to the 1st petitioner the requisite D.S.V. licence under Rule 26 of the Bombay Denatured Spirit Rules, 1959 as also to forthwith release 14.40 lakh bulk H

litres of alcohol/specially denatured spirit annually to the 2nd petitioner."

In order to appreciate whether or not the relief granted woull:l be justified, it is necessary to notice a few relevant facts.

B M/s. Pooja Brew-chem Industries Ltd., Bombay [hereinafter referred to as 'the appellant'] had applied to the Commissioner, Prohibition and Excise for grant of a perit to manufacture Ethyl Acetate falling under products covered in Schedule I issued by the Government of India. Referring to the said application, the office of Director of Industries in its letter C dated July 31, 1990 addressed to the Commissioner, Prohibition and Excise, stated that for that purpose a licence from the Central Government was compulsory and it was difficult to obtain it unless it complied with certain requirements enumerated in the enclosed letter. It was also stated that after taking review of the progress made by the respondent-Company the office was recommending to accord sanction to the respondent-Com- D pany to utilise assured annual quota of 14.40 lakh bulk litres of alcohol for producing two products, viz., Diethyl Phthalage and Deithyl Oxalate. On April 4, 1991, a reply was given by the Home Department to the respondent-Company thus :

"Now the said unit is going to manufacture two products, i.e., Deithyl Oxalate and Diethyl Phthalate instead of Ethyl Acetate and for that purpose, the alcohol quota of 14.40 lac bulk litres which is sanctioned for manufacture of Ethyl Acetate will remain valid and the Government grants permission to continue this assurance itself. The period of assurance shall be for one year; and if the unit does not start manufacturing the aforesaid products by overcoming all difficulties during this period, it may be considered that assurance for alcohol quota is cancelled."

Thereafter, the company had written a letter on April, 1 1992 to the Commissioner intimating that they had completed their project to G manufacture the products in the factory located at the stated place and that they were ready to start the production. They requested in the letter to issue the licence required under Rule 26 of the Bombay Denatured Spirit Rules, 1959 [for short, '.the Rules'). It appears that the matter was considered at different stages. It was asserted by the respondent-Company H in the writ petition that ultimately the Minister had recommended the grant

...

STATE v. POOJABREW-CHEM INDS. P. LTD. 743

of licence and also allocation of the required quota of 14.40 lakh bulk litres A of rectified spirit for manufacture of the aforesaid two products. Since licence was not being granted, the respondent-Company approached the High Court which gave the abovestated directions.

It is contended by Sri Dholakia, learned senior counsel appearing for the State, that though at one stage the Government had decided to grant D.S.V. licence, subsequently it had come to the notice of the Government that certain sensitive materials were required to be examined. Accordingly, they examined the matter before taking any decision but in the meantime the High Court moved under Article 226 of the Constitution, had issued

c the directions, as stated earlier. It is contended that on June 21, 1993, decontrol of allocation and supply from the Government sources of the rectified sprit was made. In consequence, the Government had lost control over the allotment. Thereafter, an industry was free to approach the appropriate authority for supply of alcohol for manufacture of any of their products as a raw material and that, therefore, the direction issued by the D High Court to supply 14.40 lakh bulk litres of alcohol in terms of the compromise is clearly unsustainable. It is also contended that so long as the licence is not issued under Rule 26 of the Rules in D.S.V. Form, the respondent-Company is not entitled even to start manufacturing thereof.

Therefore, the High Court was clearly in error in issuing the above directions.

Shri AM. Singhvi, learned counsel for respondent No. 1, contended that in view of the various letters referred to hereinbefore, a compromise

was made by the Government for the establishment of the factory. On the basis of the said compromise, the respondents had established the factory F at a huge expenditure and that, therefore, the appellants were estopped from going behind the compromise to grant the licence. He agrees that after the decontrol of allotment of alcohol, the requirement was that the licensing authority, viz., the Superintendent, was to specify the quantum required by the respondent-company to manufacture the specified items.

Unless the specification of the requirement was made, it was difficult for G the respondent-company to procure alcohol in the open market and keep the same in store for manufacture of the products. The appellantauthorities were not justified in not granting the same.

Having regard to the respective contentions, the question is whether H

A the order passed by the High Court is sustainable in law. The essential question would, therefore, be whether the respondent can have a licence under Rule 26. Admittedly, till date no licence is issued. It is true, as contended by Shri Singhvi, that the required quantum for the manufacture of the products is to be specified in the licence, as is evident from similar

licences issued to other companies. But after June 21, 1993, the Government has no obligation to make any allotment of alcohol and supply the same to any manufacturer since after the decontrol, it is free for all to purchase alcohol wherever it is available. But, as stated earlier, issuance of the licence under Form D.S.V. being a condition precedent, the respondent-compny could not start mani:tfacturing the aforesaid two items unless licence was issued to it. The question, therefore, is whether the Government would be justified in not issuing licence. It is submitted that a citizen is entitled to set up a factbry and, as required by certain statutory provisions, the authorities exercising the power are expected to issue the licence subject to the conditions prescribed thereunder. It is stated in D paragraph 8 of the rejoinder filed in this Court that certain material as

. regards the desirability to grant the licence to the respondentcompany, appears to have been covered by the subordinates of the Government. If that is so, then necessarily the concerned authority has to put on notice as to what material adverse to the appellants is in its possession and it has to supply necessary copies thereof and also their prima f acie views on that material so that the respondent-Company would have an opportunity to place all the material to justify its seeking for the licence. Thereafter, it is open to the appropriate authority to consider and refuse or grant. the licence for the reasons to be mentioned in the order. Since this .exercise had not been performed, the High Court was not justified in directing the F appellants to issue the licence. Accordingly, we set aside the directions issued by the High Court. Instead, the state is directed to issue notice to the respondent-Company on grounds on which they propose to take action in case they feel that it is not feasible to issue the licence to the respondent-Company together with the material in their custody on the basis of G which they formed that opinion. This should be done within a period of one month from the date of the receipt of this order. On receipt thereof, it would be open to te respondent-Company to submits its response and any other material in supports of its claim. On receipt thereof, the licensing authority would consider the case and pass appropriate order and com- H municate the same within a period of two months therefrom to the respon-

STATE v. POOJABREW-CHEMINDS. P. LTD. 745

dent-Company by registered post with acknowledgment due.

Our setting aside the order of the High Court may not be construed to mean that exercise of the statutory power of the licensing authority is fettered in any way.

Shri Dholakia brought to our notice that some material appears to be confidential and, therefore, it is not advisable in the expediency of public administration to disclose the same by supplying copies thereof. If that is so, the competent authority is at liberty to allow inspection of such material by the counsel for the respondent-Company and on inspection thereof, it would be open to them to submit their response.

The appeal is accordingly allowed. No costs.

R.P.

Appeal allowed.