Paragraph numbers below are the court’s original numbering, recovered from the source text.
38. The Court also made the following observations; We may mention that while the Commissioner is now the Licensing Authority, the State Government is the appellate authority. It is a matter of common knowledge that the Sugarcane Control Q,. Order was made in the interests of growers of sugarcane primarily and also in the interests of the sugar factories, that is, factories engaged in the manufacture of sugar by the vacuum pan process and in the ultimate analysis in the interests of the consumers by making sugarcane available for sugar production. Apart from the y fact that the sugar produced by the vacuum pan process is better suited for domestic consumption, it is undisputed that in the case of vacuum pan sugar factories, the recovery of sugar from cane ranges between 9.5% to 11.5% while the recovery in the case of Khandasari Units is hardly 5 to 6%. There can be no question that viewed from the viewpoint of production of sugar, it is advantageous to divert as much sugarcane as possible to sugarcane factories instead of K.handasari Units Even so K.handasari Units flourish, as is generally known because of the byproduct of molasses. As experience showed that Khandasari units are better '-I c able to tap the growers of sugarcane, it became necessary for the Government to reserve areas for sugar mills. Otherwise, sugar mills would have to remain idle for long periods unable to withstand the competition of khandasari units in reaching sugarcane growers. It was for that purpose, that is, with a view to prevent sugar factories from remaining idle by making available to them sufficient quantities of sugarcane that the idea of reserving areas for sugar factories was conceived. In the years when there is no dearth of sugarcane ).;.._ and it is available in plenty, there is no problem and khandasari units will be free to purchase as much as sugarcane as they want in reserved areas also if the units are located there. But problems arise when on account of bad seasonal conditions there is a fall in the production of sugarcane in some years. In such years, restrictions have to be imposed on the purchase of sugarcane by khandasari units in areas reserved for sugar factories and when the seasonal conditions are indeed very bad, it may even become ,' -·- ….( necessary for the Government to altogether ban the purchase of sugarcane by khandasari units in areas reserved for sugar factories. This may be done by the refusal to grant or renew licences to khandasari units operating in reserved areas in those years. That is precisely what has happened in the present case. It is because of extremely bad seasonal conditions that the Cane Commissioner was forced to refuse to renew the licenses 6f the appellants on the ground of inadequate of sugarcane for sugar factories. According to the figures mentioned by Cane Commissioner, the production of sugarcane had fallen from 52.50 lakh tonnes in 1983- y M/S.DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF 233 UTTARANCHAL [THAKKER, J.] 84 to 46.20 lakh tonnes in 1984-85 and 41.38 lakh tonnes in A 1985-86. We also have it that in the previous crushing season one of the sugar factories, namely, the Panipat Co-operative Sugar Mills only crush 10.80 lakh quintals of sugarcane as against the allotted quantity of 25 lakh quintals due to lack of availability of sugarcane. In fact, on September 14 1984, the Government of India had .B already addressed a communication to the Secretaries to the Governments of all sugar producing States requiring them to take ).-· certain measures to avoid diversion of sugarcane from sugar mills. It was stated in the letter that in the year 1983-84, sugar production had declined sharply from 82.32 lakh tonnes to 59 lakh tonnes. c Among the measures suggested was "not to grant fresh licences to khandasari units in the reserved areas of sugar factories and to the extent possible even to encourage by all possible means the existing khandasari units in the reserved areas to shift out". We do not, therefore, have any doubt that having regard to the fall in the D production of sugarcane and the fall in the production of sugar, the _ 1. banning of supply of sugarcane to khandasari units by the method of refusing to licence khandasari units operating in reserved areas was in the public interest.
39. The High Court, in our opinion, was right in observing that E Ganesh Sugar Works was decided in the light of fact-situation before the Court. In our view, the learned counsel for the respondents are right in submitting that even in that case, this Court has indicated that the ,,.. . Government ought to take into consideration interest of sugarcane growers also. In the present case, the Sugarcane Commissioner has precisely F performed that function when he observed that the sugarcane growers had one more option available for realizing proper return. Apart from the fact that it cannot be said to be an irrelevant consideration, the Authorities are enjoined to keep in view this aspect as one of the considerations and we see no infirmity therein.
40. It is also pertinent to note that when licence was granted to respondent No. 4 by the Sugarcane Commissioner for one Power Crusher of a capacity of 1250 TCD, the appellant as also respondent No. 4 challenged that order. The grievance of the appellant was that no such A licence could have been granted by the Sugarcane Commissioner in favour of respondent No. 4. The complaint made by respondent No. 4, on the other hand, was that the Licensing Authority ought to have granted licence for 1500 TCD as applied.
41. The State Government disposed of both the matters by upholding B the order passed by the Sugarcane Commissioner observing that the action taken by the Licensing Authority could°not be said to be illegal or improper. It also considered the fact that farmers in the area had to face problems as Kashipur'Unit was declared as 'sick unit' and it adversely affected cane area. c
42. The Appellate Authority, therefore, stated; After deeply considering of records available in the file and arguments of Appellant and Mis DSM Sugar, I am in the opinion that the license granted to Mis IGL, Kashipur in village Sandkheda, District Udham Singh Nagar for one Power Driven Kolhu size 71x42cm, 15 Rollers hydraulic capacity 1250 TCD Open Pan Steam Boiling Systerµ for season 2003-04 under Cane Purchase Tax Act, 1961 and the Licensing Rules under the said Act by Cane and ,Sugar Commissioner, Uttranchal is in accordance with the Act and Rules and there is no need to amend the order dated 17 /2/ 2004 passed by the Cane and Sugar Commissioner, Uttranchal in view of his estimation of cane availability.
43. The Authority also took into consideration the interest of the F appellant herein and protected the Factory by making the following observations; As far as, the argument of Mis DSM Sugar that the estimation of cane availability by Cane and Sugar Commissioner, Uttranchal is wrong, it is duty of Cane and Sugar Commissioner to ensure availability of sugarcane to Sugar Mill as from its requirement under section 15 of UP Sugarcane (Regulation of Supply and Purchase) Act, 1953. The Cane and Sugar Commissioner, Uttranchal shall ensure that other conditions being same Mis DSM Sugar should get cane in proportion to its crushing capacity. The Cane y ,,,., M/S.DHAMPURSUGAR(KASHIPUR)LTD.v. STATEOF 235 UTTARANCHAL [THAKKER,J.] Commissioner can reserve or divert cane from the area of one A ).r Sugar Mill to other Sugar Mill on the basis of cane availability.
44. We are of the view that in the light of the above considerations and findings, no interference with the order was called for and the High Court was right in confirming the orders passed by the Authorities.
45. Learned counsel for the appellant urged that Clause 3 of the Gur (Regulation of Use) Order, 1968 bars use of gur for any purpose other than as specified in sub-clauses (a) to (c). It was, therefore, submitted that the grant oflicence by respondent Nos. 1 to 3 to respondent No. 4 for preparation of alcoholic liquor is in violation of the provision of c law. The learned counsel for the respondent No. 4, however, submitted that the same clause (Clause 3) confers power on the Central Government or any officer authorized by it to permit the use of gur inter alia for the use in chemical industry or for any other industrial use.
46. The High Court considered the contention and observed that D .l. the application submitted by respondent No. 4 was limited to manufacture of rah and no use was indicated at all. From the counter-affidavit filed in the High Court, no such indication was exhibited. But in any case, ifthere was violation of provision of law relating to use of rah for a purpose other than permitted by law, the remedy was not to challenge licence but to question the use of rah. An appropriate direction in such an eventuality can always be issued by the Authority. POLICY MATTERS AND JUDICIAL REVIEW
47. The learned counsel for the appellant contended that though as per policy of the Government for the year 2002-03, licence could not have been granted and in fact it was not granted to respondent No. 4, the policy was changed by the Government to favour respondent No. 4 and licence was granted under the altered policy which was illegal and unlawful and malicious. Regarding ma/a fide exercise of power, we will G consider at an appropriate stage, but let us consider the general principles relating to policy matters, right of Government to fornmlate, follow or change such policy as also the power of judicial review by writ-courts over such matters.
48. In our judgment, it is well-settled that public authorities must have liberty and freedom in framing policies. No doubt, the discretion is not absolute, unqualified, unfettered or uncanalised and judiciary has control over all executive actions. At the same time, however, it is well-established that courts are ill-equipped to deal with these matters. In complex social, B economic and commercial mattes, decisions have to be taken by governmental authorities keeping in view several factors, and it is not possible for courts to consider competing claims and conflicting interests and to conclude which way the balance tilts. There are no objective, justiciable or manageable standards to judge the issues nor such questions c can be decided on 'a priori' considerations.
49. As observed by Justice Holmes in Metropolis Theatre Company v. State of Chicago, 57 L Ed 730, in such matters, the courts must grant certain measure of ''play in the joints'' to the executive.
50. In the leading case of Bennett Coleman v. Union of India, [1972] 2 SCC 788 : AIR (1973) SC 106, constitutional validity of the Import Policy for the newsprint adopted by the Government was challenged in this Court The Court refused to adjudicate the policy matters unless it was shown to be arbitrary, capricious or malajide. Speaking E for the Court, Mathew, J. observed: "The argument of the petitim1ers that Government should have accorded greater priority to the import of newsprint to supply the need of all newspaper proprietors to the maximum extent is a matter relating to the policy of import and this Court cannot be propelled into the unchartered ocean of Governmental policy". (emphasis supplied)
51. Similarly, in State of Maharashtra v. Lok Shiksha Sanstha, [1971] 2 SCC 410: AIR (1973) SC 588, the applications made by the G petitioners for opening new schools were rejected by the authorities. The said action was challenged by the petitioners by filing writ petitions in the High Court on various grounds. The High Court allowed the petitions and directed the authorities to grant permission to the petitioners to start schools. —(' MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 237 UTTARANCHAL [THAKKER, J.]
52. Reversing the judgment, this Court observed that the High Court A has thoroughly misunderstood the nature of the jurisdiction that was exercised by it ''So long as there is no violation of any fundamental rights and if the principles of natural justice are not offended, it was not for the High Court to lay down the policy that should be adopted by the educational authorities in the matter of granting permission for starting B schools. The question of policy is essentially for the State and such policy will depend upon an overall assessment and summary of the requirements of residents of a particular locality and other categories of persons for whom it is essential to provide facilities for education. If the overall assessment is arrived at after a proper classification on a reasonable c basis, it is not for the courts to interfere with the policy leading up to such assessment. " (emphasis supplied)
53. In R.K. Garg v. Union of India, [1981] 4 SCC 675 : AIR (1981) SC 2138: [1982] 1 SCR 947, constitutional validity of the Special' Bearer Bonds (Immunities and Exemptions) Act, 1981 was challenged being arbitrary and having no reasonable nexus with the object sought to be achieved. Holding the Act intra vires and constitutional and describing it as a policy legislation, the majority stated: "The court must always remember that 'legislation is directed· E to practical problems, that the economic mechanism is highly sensitive and complex, that many problems are singular and contingent, that laws are not abstract propositions and do not relate to abstract units and are not to be measured by abstract symmetry', 'that exact wisdom and nice adaption of remedy are , F not always possible' and that 'judgment is largely a prophecy based on meager and uninterrupted experience'. Every legislation, particularly in economic matters is essentially empiric and it is based on experimentation or what one may call trial and error method and therefore it cannot provide for all possible situations G or anticipate all possible abuses. There, may be crudities and -1' inequities in complicated experimental economic legislation but on that account alone it cannot be struck down as invalid. " (emphasis supplied) c
54. In Liberty Oil Mills v. Union of India, [1984] 3 SCC 465, dealing with the import and export policy followed by the Government, this Court observed: "The import policy of any country, particularly a developing country, has necessarily to be tuned to its general economic policy founded upon its constitutional goals, the requirements of its internal and international trade, its agricultural and industrial development plans, its monetary and financial strategies and last but not the least the international political and diplomatic overtones depending on ·'friendship, neutrality or hostility with other countries'. There must also be a considerable number of other factors which go into the making of an import policy. Expertise in public and political, national and international economy is necessary before one may engage in the making or in the criticism of an import policy. Obviously courts do not possess the expertise and are consequently incompetent to pass judgment on the appropriateness or the adequacy of a particular, import policy. (emphasis supplied)
55. Again, in State of MP. v. Nandlal, [1986] 4 SCC 566 : AIR E (1987) SC 25: JT (1986) SC 701, a licence to run liquor shop granted in favour of A was challenged as arbitrary and unreasonable. This Court held that there was no fundamental right in a citizen to carry on trade or business in liquor. However, the State was. bound to act in accordance with law and not according to its sweet will or in an arbitrary manner and F it could not escape the riguor of Article 14. Therefore, the contention that Article 14 would have no application in a case where the licence to manufacture or sell liquor was to be granted by the State Government was negatived by this Court.
56. The Court, however, observed: "But, while considering the applicability of Article 14 in such a case, we must bear in mind that, having regard to the nature of the trade or business, the Court would be slow to interfere with the policy laid down by the State Government for grant of licences for manufacture and sale ofliquor. The Court would, in view of the ·y j ,.>… -1 MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 239 UTTARANCHAL [THAKKER,J.] inherently pernicious nattrre of the commodity allow a large measure of latitude to the State Government in determining its policy of regulating, manufacture and trade in liquor. Moreover, the grant of licences for manufacture and sale of liquor would essentially be a matter of economic policy where the court would hesitate to intervene and strike down what the State Government has done, unless it appears to be plainly arbitrary, irrational or mala fide". (emphasis supplied)
57. Referring to the decision of the Supreme Court of the United States in Metropolis Theatre Company, the Court observed: "We must not forget that in complex economic matters every decision is necessarily empiric and it is based on experimentation or what one may call 'trial and error method' and, therefore, its validity cannot be tested on any rigid 'a priori' considerations or on the application of any straight-jacket formula The court must while adjudging the constitutional validity of an executive decision relating to economic matters grant a certain measure of freedom or play in the 'joints' to the executive …. Mere errors of Government are not subject to our judicial review. It is only its palpably arbitrary exercises which can be declared void .. ' The Court cannot strike down a policy decision taken by the State Government merely because it feels that another policy decision would have been fairer or wiser or more scientific or logical. The Court can interfere only if the policy decision is patently arbitrary, discriminatory or mala fide." (emphasis supplied)
58. In Shri Sitaram Sugar Co. Ltd. v. Union of India, [1990] 3 SCC 223 : AIR (1990) SC 1277 : JT (1990) 1 SC 462, prices oflevy sugar were fixed by the Government by grouping sugar factories on the basis of geographical location. The said action was challenged by certain sugar companies as arbitrary, unreasonable and ultra vires. Dismissing the petitions and holding it to be a policy decisions of the Central Government, this Court observed: "What is best for the sugar industry and in what manner the c p policy should be fonnulated and iinplemented, bearing in mind the fundamental object of the statute, viz., supply and equitable distribution of essential commodity at fair prices in the best interest of the general public, is a matter for decision exclusively within the province of the Central Government. Such matters do not ordinarily attract the power of judicial review". (emphasis supplied)
59. In Ugar Sugar Works Ltd v. Delhi Administration, [2001] 3 sec 635: AIR (2001) SC 1447: JT (2001) 4 SC 31, dealing with the C executive policy regulating trade in liquor in Delhi, this Court stated that it was well settled that the courts, in exercise of power of judicial review do not ordinarily interfere with the policy decisions unless such policy could be faulted on the grounds of ma/a fide, unreasonableness, arbitrariness, unfairness, etc. But the mere fact that it would hurt business D interests of a party would not justify invalidating the policy. In tax and economic regulation cases, there are good reasons for judicial restraint, if not judicial deference, to judgment of the executive., The Courts are not expected to express their opinion as to whether at a particular point of time or in a particular situation any such policy E should have been adopted or not. It is best left to the discretion of the State. (emphasis supplied) [See also SIEL Ltd v. Union of India & Ors., [1998] 7 SCC 26 : AIR 1998 SC 3076].
60. In BALCO Employees Union v. Union of India, [2002] 2 SCC 333 : AIR (2002) SC 350 : JT (2001) 10 SC 466, a decision of the F Government oflndia of transferring its majority shares in favour of Mis Bharat Aluminium Company Ltd. was challenged by the employees as illegal, unlawful and ultra vires Articles 14 and 16 of the Constitution. Negativing the contention and µpholding the decision of the Government, after referring to several cases on the point, this Court stated: "Process of disinvestment is a policy decision involving complex economic factors. The Courts have consistently refrained from interfering with economic decisions as it has been recognised that economic expediencies lack adjudicative disposition and unless the economic decision, based on economic expediencies, is M/S.DHAMPURSUGAR(KASHIPUR)LTD. v. STATEOF241 UTTARANCHAL [THAKKER,J.] demonstrated to be so violative of constitutional or legal limits on A power or so abhorrent to reason, that the Courts would decline to interfere. In matters relating to economic issues, the Government has, while taking a decision, right to "trial and error" as long as both trial and error are bona fide and within limits of authority". (emphasis supplied)
61. The State and its instrumentality has also power to change policy. The executive power is not.limited to frame a particular policy. It has untrammeled power to change, rechange, adjust and readjust the policy C taking into account the relevant and germane considerations. It is entirely in the discretion of the Government how a policy should be shaped. It should not, however, be arbitrary, capricious or unreasonable.
62. In Sangwan v. Union of India, [1980] Supp SCC 559 : AIR D (1981) SC 1545, this Court observed that "a policy once formulated is not good forever, it is perfectly within the competence of the Union of India to change it, re-change it, adjust it and readjust it according to the compulsions of circumstances and imperatives of national considerations".
63. In Union of India v. S.L. Dutta, (1991] 1 SCC 505 : AIR E · (1991) SC 363: JT (1990) 4 SC 741, the old policy of promotion was changed and new policy was adopted. The High Court interfered with the decision taken by the authorities observing that ''the new promotion policy was not framed after an in-depth study'' and directed the Government to consider the case of the petitioner on the basis of the old policy.
64. Setting aside the said order and upholding the policy, this Court observed: "These are matters regarding which judges and the lawyers of G courts can hardly be expected to have much knowledge by reason of their training and experience".
65. In our opinion, Chief Justice Chagla was right in making the following observations in State of Bombay v. Laxmidas Ranchhoddas, B A AIR (1952) Born 468; c "We are not oblivious of the fact that in order that the modem State should function the Government must be armed with very large powers. But the High Court does not interfere with the exercise of those powers, The High Court only interferes when it finds that those powers are not exercised in accordance with the mandate of the Legislature. 1berefore, far from interfering with the good governance of the State, the Court helps the good governance by constantly reminding Government and its officers that they should act within the four comers of the statute and not contravene any of the conditions laid down as a limitation upon, their undoubtedly wide powers. Therefore, even from a practical point of view, even from the point of view of the good governance of the State, we think that the High Court should not be reluctant to issue its prerogative writ whenever it finds that the sovereign Legislature has not been obeyed and powers have been assumed which the Legislature never conferred upon the executive". (emphasis suppiied) MALA FIDE EXERCISE OF POWER
66. The appellant also contended that the impugned action of granting licence to respondent No. 4 by respondent Nos. 1 to 3 is mala fide. It was submitted that in spite of acute shortage of sugarcane in the F State ofUttranchal, the policy was changed by the Government in order to grant benefit to respondent No. 4, not only at the cost of interest of the appellant but also by ignoring larger public interest and industrial growth and development. In this connection, the attention of the Court was also invited to a letter, dated August 04, 2003 written by the cane & Sugar G Commissioner to the Secretary, Cane Development & Sugar Industry, Uttranchal wherein he had stated that there was no necessity to make any change in tl1e Licensing Policy for 2003-"04. The counsel submitted that surprisingly, within a short span of about two months, the same Commissioner agreed to change in policy by inserting a proviso to para H ka with the sole objective to favour respondent No. 4. It was pursuant MIS. DHAMPURSUGAR(KASHIPUR)LTD. v. STATE OF 243 UTTARANCHAL [THAKKER, J.] to modified policy that respondent No. 4 got the licence. Therefore, the A action deserves to be set aside on the ground of ma/a fide exercise 0£ power.
67. Now, it is well-settled and needs no authority for holding that every power must be exercised bona fide and in good faith. Before more B than hundred years, Lord Lindley said in General Assembly of Free Church o/Scotlandv. Overtaum, (1904) AC 515: 20 TLR 370; "I take it to be clear that there is a condition implied in this as well as in other instruments which create power, namely, that the powers shall be used bona fide for the purpose for which they are conferred". In other words, every action of a public authority must be based on utmost good C faith, genuine satisfaction and ought to be supported by reason and rationale. It is, therefore, not only the power but the duty of the Court to ensure that all authorities exercise their powers properly, lawfully and in good faith. If powers are exercised with oblique motive, bad faith or for extraneous or irrelevant considerations, there is no exercise of power D known to law and the action cannot be termed as action in accordance with law.
68. But as already discussed earlier, a Court of Law is not expected to propel into 'the unchartered ocean' of Government Policies. Once it E is held that the Government has power to frame and reframe, change and rechange, adjust and readjust policy, the said action cannot be declared illegal, arbitrary or ultra vires the provisions of the Constitution only on the ground that the earlier policy had been given up, changed or not adhered to. It also cannot be attacked on the plea that the earlier policy F was better and suited to the prevailing situation.
69. Allegations of ma/a.fide are serious in nature and they essentially raise a question of fact. It is, therefore, necessary for the person making such allegations to supply full particulars in the petition. If sufficient averments and requisite materials are not on record, the court would not G make 'fishing' or roving inquiry. Mere assertion, vague averment or bald statement is not enough to hold the action to be ma/a.fide. It must be demonstrated by facts. Moreover, the burden of proving mala fide is on the person levelling such allegations and the burden is 'very heavy' [vide E.P. Royappa v. State o/Tamil Nadu, [1974] 4 SCC 4: [1974] H A 2 SCR 348]. The charge of mala fide is more easily made than made out. As stated by Krishna Iyer, J. in Gulam Mustafa v. State of Maharashtra, [1976] 1 SCC 800: AIR (1977) SC 448], it is the last refuge of a losing litigant [see also Ajit Kumar v. Indian Oil Corporation, [2005] 7 sec 764]. In the case on hand, except alleging that the policy B was altered by the Government, to extend the benefit to respondent No. 4, no material whatsoever has been placed on record by the appellant. We are, therefore, unable to uphold the contention of the learned counsel that the impugned action is ma la fide or malicious.
70. The High Court, in our opinion, was right in observing that the change of policy was not limited to the case of respondent No. 4 but it was uniformly applied to one and all. To us, therefore, it cannot be contended that the High Court committed an error in arriving at the said conclusion which requires interference under Article 136 of the Constitution. We, therefore, see no substance in this argument as well.
71. Keeping in view statutory provisions, the policy decision taken by the respondent-authorities and interest of all parties including existing sugar factories, a decision has been taken by the respondent Nos. 1 to 3 granting licence in favour of respondent No. 4. The said decision was E confirmed by the State in exercise of appellate power and the High Court was not convinced that the decision was illegal, arbitrary or otherwise unreasonable. We are unable to persuade ourselves to hold that all. the decisions suffer from any error of law or of jurisdiction and they should be set aside. We, therefore, express our inability to grant relief to the F appellant.
72. For the foregoing reasons, we hold that the decisions taken by the respondent-authorities and confirmed by the High Court suffer from no illegality or infirmity. The appeal, therefore, deserves to be dismissed and is accordingly dismissed, however, without any order as to costs. S.K.S. Appeal dismissed.