Shivashakti Sugars Limited v. Shree Renuka Sugar Limited & Ors(2017): It is the duty of the court to have economic analysis of its decision.

CaseShivashakti Sugars Limited v. Shree Renuka Sugar Limited & Ors.
CourtBefore the Supreme Court of India
BenchA.K.Sikri, A.M.Sapre, JJ.
Author of the judgementA.K.Sikri, J.
Decided on09.05.2017
AbstractThis is a landmark judgment in which the Supreme Court has held that it is the duty of the Court to consider the economic impact and analysis of its decisions before deciding any case. However, such economic analysis cannot supersede the statutory provisions of law.
Author of the briefDarshan Patankar, Student at Gujarat National Law University.
KeywordsSugarcane (Control) Amendment Act, Sugar Mills,

Brief Facts: –

(1) In the instant case, the appellant i.e. Shivshakti Sugars Limited had filed a Special Leave Petition challenging the judgment of the Karnataka High Court dated 29.03.2011 by which the High Court had held that the distance between the sugar factory of the appellant and the Raibagh Sahakari Sugar Factory was less than 15 kilometres and therefore the setting of the appellants sugar factory violated clause 6A of the Sugarcane (Control) Amendment Order, 2006.

(2) The Court had held that the appellant could not establish the sugar factory in view of the existing sugar mills i.e. Raibagh Sahakari Sugar Factory and Doodhganga Sugar Mills. The High Court had also held that Raibagh Sugar Factory was an existing factory within the meaning of Clause 6A of the Sugarcane Control Ordinance. Also, the Industrial Entrepreneurs Memoranda (“IEM”) of the appellant was derecognised by the impugned judgment. It was also held that the appellant had not taken “effective steps” for the setting up of the Sugar Factory as required by the Sugarcane (Control) Amendment Order of 2006.

(3) Clause 6A of the 2006 order provided that no new sugar factory could be set up within the radius of 15km of any existing sugar factory or another new sugar factory in a State or two or more States. The explanation to Clause 6A provides that a sugar factory will not be considered as an existing sugar factory if the factory has not carried out its crushing operations for the last five sugar seasons.

Issues: – The following issues were considered: –

(1) Whether Clause 6A would be applicable in the present case?

(2) Whether even if the High Court was correct in law, in view of the subsequent events, i.e. establishment of sugar mill by the appellant and it continues to crush sugarcane since the year 2011, the appellant’s factory may be permitted to continue, in the interest of justice?

Appellants Contention: – Ms Chidamabaram and Kavin Gulati, Senior Advocates appeared for the Appellant. They made the following submissions: –

(1) The Raibagh Sahakari Sugar Factory was not in operation on 08.06.2006 i.e. the date on which the IEM of the appellant was acknowledged. Therefore, the distance requirement as per Clause 6A was not applicable in the instant case and Raibagh Sahakari was not an existing factory since it had not carried out crushing operations for the last five sugar seasons prior to 08.06.2006 i.e. since 2001-2002.

(2) Further, the Appellant highlighted the fact that the purpose of distance requirement was that there should be sufficient availability of sugarcane in the area so as to easily cater to all the sugar factories. The Appellants Sugar Factory had not adversely affected the utilisation of crushing capacity of either Doodhganga Sugar Mills or Raibagh Sahakari Sugar Factory and hence, the distance requirement could not be applicable in the instant case.

(3) The Appellant submitted that even if there was a shortage of sugarcane (though it was not so), sugarcane from the 14 villages originally assigned to the Respondent but now with the appellant could be reassigned to the Respondent.

Respondents Contention: – Learned Counsel for the Respondents made the following submissions: –

(1) The Respondents heavily relied on the reasoning of the impugned judgment of the High Court to support their case. They contended that the High Court was correct in cancelling the operations of the Appellants Sugar Factory.

(2) It was contended that Clause 6A was a mandatory clause which would be applicable in the present case and that the report of the Survey of India submitted before the High Court established the fact that the distance between the two sugar factories was less than 15 kilometres and so, the decision of the High Court should be upheld.

Decision of the Court: – Authored by A.K.Sikri, J.

(1) The Court found merit in the submissions of the Appellant and it held that Raibagh Sahakari was not an existing sugar factory for the purpose of Clause 6A of the Sugarcane (Control) Amendment Order, 2006 since it had not crushed for the last five consecutive years. It observed that the High Court had wrongly recorded that the requirement of crushing was for any one season out of the last five seasons and this led to the error in holding that Raibagh Sahakari was an existing sugar factory. Accordingly, the Court held that the distance requirement of 15 kilometres in Clause 6A would be inapplicable in the instant case. It also observed that the bonafide of the appellant could not be questioned since both Raibagh Sahakari and Doodhganga had granted no- objection certificates to the appellant.

(2) The Court looked at certain steps which the appellant had taken which included: –

            (i) purchase of land;

            (ii) purchase of machinery and equipment and advance payment in that behalf;

            (iii) the taking of loans to the tune of Rs. 237 crores till the year 2013;

(iv) appointment of 377 persons as employees in regular employment and indirect employment of approximately 7150 persons during the crushing season;

(v) setting up of a co-generation plant for production of electricity which was presently giving a supply of 37 MW electricity.

And after taking into account the aforesaid facts, the Court observed that no purpose would be served in getting the sugar factory of the appellant closed and these economic considerations could not be overlooked in a situation where there was hardly any statutory violation.

(3) The Court observed the fact that law is an inter-disciplinary subject and that it was the duty of the court to have the economic analysis and economic impact of its decisions. However, while doing so, specific provisions of the law cannot be ignored and the first duty of the court is to apply the statutory provisions. It also held that while interpreting a provision and on the application of the law, the economic impact must also be taken into consideration.

(4) It was held that where two views or interpretations were possible, the court should lean in favour of the approach which subserves the economic interest of the country and the approach which has a potential to create an adverse effect on employment, the growth of infrastructure or economy of the state should be avoided.

(5) The Court referred to the decision in Raunaq International Limited v. I.V.R Construction & Ors., (1999) 1 SCC 492 in which the Supreme Court had cautioned all High Courts not to easily grant interim stay where a party challenged award of tender by the government in favour of a party since such interim stay could escalate the costs of the project and would be against public interest. Also, the Court observed that in a situation where there are two conflicting economic interests, it should endeavour to strike a balance.

(6) Accordingly, the Court allowed the appeal and held that 14 villages which were originally assigned to the Respondent but now in possession of the Appellant would be reassigned to the Respondent.

Ratio: – This is a landmark judgment in which the Supreme Court has held that it is the duty of the Court to consider the economic impact and analysis of its decisions before deciding any case. However, such economic analysis cannot supersede the statutory provisions of law. The Court will have to consider the statutory provisions first, and while interpreting and applying the laws, the economic analysis is a relevant consideration for adjudication. Also, in a situation where more than one interpretation is possible, the court will adopt a construction which is beneficial to the economy and will ignore the approach which will have a potential adverse effect. Therefore, the economic analysis of any decision from now on becomes imperative and indispensable. However, the Court has also observed that if circumstances necessitate, the Court can exercise its plenary power under Article 142 of the Constitution of India even in the case of any technical violation and decide the case in a way so as to strengthen the economic framework of the country. Lastly, the court observed that time has come to consider the inter-discipline between law and economics on a sustainable basis.

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