Supreme Court of India
M/S BAJAJ HINDUSTAN LTD.versusSIR SHADI LAL ENTERPRISES LTD. & ANR.
- Citation
- 2010 INSC 831
- Decided
- 29 November 2010
- Disposal
- Appeal(s) allowed
Holding
The de‑licensing of the sugar industry by the Press Note and Notification under Section 298 of the Industries (Development and Regulation) Act, 1951, is valid and not an unlawful delegation of power.
Summary
The Supreme Court examined whether the Union Government could de‑license the sugar industry by issuing Press Note 12 and a Notification under Section 298 of the Industries (Development and Regulation) Act, 1951, without a parliamentary amendment. It held that the executive power under Article 73(1) is co‑extensive with legislative power and that Section 298 provides sufficient authority to exempt a scheduled industry, rendering the de‑licensing valid. The Court rejected the High Court’s view that such a policy required legislative enactment and that the delegation of power was excessive. It emphasized that courts may only intervene in policy decisions when there is a clear statutory or constitutional violation or arbitrariness, not merely on the wisdom of the policy. Consequently, the Press Note and Notification were upheld and the High Court’s judgment set aside.
Issues considered
- Whether the Union Government can de‑license the sugar industry under Section 298 of the IDR Act without parliamentary approval.
- Whether Section 298 constitutes an excessive delegation of legislative power.
- Whether the Press Note and Notification issued in 1998 are valid exercises of executive power.
- Scope of judicial review over economic and policy decisions of the executive.
- Whether the doctrine of legitimate expectation applies to the de‑licensing scheme.
Legislation cited
- Essential Commodities Act, 1955s. 3
- Industries (Development and Regulation) Act, 1951s. 10, s. 11, s. 11A, s. 13, s. 2, s. 298, s. 3
Subjects
de‑licensingIndustries (Development and Regulation) ActSection 298excessive delegationjudicial revieweconomic policypublic interestlegislative‑executive powersugar industrylegitimate expectation
Judgment
[2010] 15 (ADDL.) S.C.R. 156
A M/S BAJAJ HINDUSTAN LTD.
v.
SIR SHADI LAL ENTERPRISES LTD. & ANR.
(Civil Appeal No. 5856 of 2005)
NOVEMBER 29, 2010
B
[MARKANDEY KAT JU AND GYAN SUD HA MISRA, JJ.)
Industries (Development and Regulation) Act, 1951:
C s.298 - De-licencing of sugar industry - Press Note 12
dated 31. 8. 1998, followed by a formal Notification on
11. 9. 1998 issued u/s. 298(1) of the Act, de-licencing the sugar
industry, subject to the condition that there would be a
minimum of 15 Km. distance between two sugar mills -
D Validity of - Held: Valid.
s.298 - Power under- Held: Is not tainted by the vice of
excessive delegation since the essential legislative policy is
specified in the preamble of the Act and is writ large
throughout the provisions of the Act.
E
s. 298 - Legislative history of - Discussed.
s. 298 - Notification dated 11. 9. 1998 issued under -
Quashing of, by High Court holding that the de-licencing could
only be done by the legislature and not by the executive -
F Held: The executive power of Union of India is co-extensive
with the legislative power under Article 73(1) of the Constitution
- Therefore, notification uls.298 was sufficient for this purpose
and it was not necessary to amend the Act to de-license the
sugar industry - There is nothing in the 1951 Act which
G required a notification uls. 298(1) to be approved by
Parliament - Whether there should be licensing of an industry
or not is for the executive authorities to decide - Constitution
of India, 1950 - Article 73(1).
H 156
BAJAJ HINDUSTAN LTD. v. SIR SHAD! LAL 157
ENTERPRISES LTD.
Administrative law: A
Judicial review - Administrative decisions - Scope of
interference by court - Held: The coµrt cannot sit in judgment
over the wisdom of the policy of the legislature or the executive
- Court can, however, interfere with administrative decisions 8
when there is clear violation of the statute or a constitutional
provision, or there is arbitrariness in the Wednesbury sense
- It is the administrators and legislators who are entitled to
frame policies and take such administrative decisions as they
think necessary in the public interest.
c
Policy decision - Power to withdraw or change - Power
to lay policy by executive decisions or by legislation includes
power to withdraw the same unless it is by ma/a fide exercise
of power, or the decision or action taken is in abuse of power
- The doctrine of legitimate expectation plays no role when D
the appropriate authority is empowered to take a decision by
an executiv_e policy or under law - When the Government is
satisfied that change in the policy was necessary in the public
interest, it would be entitled to revise the policy and lay down
a new policy. E
Economic and fiscal regulatory measures - Judicial
review - These are fields where judges should encroach upon
very warily as judges are not experts in these matters - Since
economic matters are extremely complicated this inevitably
entails special treatment for distinct social phenomena - The F
State must, therefore, be left with wide latitude in devising
ways and means of imposing fiscal regulatory measures, and
the court should not, unless compelled by the statute or by
the Constitution, encroach into this field.
G
Sugar: Historical background of sugar industry -
Industries (Development and Regulation) Act, 1951 - First
Schedule.
The Government of India issued Press Note 12 dated
H
158 SUPREME COURT REPORTS [2010] 15 (ADDL.) S.C.R.
A 31.8.1998 whereby it de-licenced the sugar industry,
subject to the condition that there would be a minimum
of 15 Km. distance between two sugar mills. The Press
Note was followed by a formal Notification on 11.9.1998
issued under Section 298(1) of the Industries
B {Development and Regulation) Act, 1951. The High Court
quashed the Press Note and the Notification on the
ground that the delicencing could only be done by the
legislature and not by the executive. The instant appeal
was filed challenging the order of the High Court.
c Allowing the appeal, the Court
HELD: 1. The Industries {Development and
Regulation) Act, 1951 placed the sugar industry in the
First Schedule to the Act, which meant that no sugar
D industry could be set up without a licence from the
Central Government. Since independence, the situation
has, however, totally changed in India. Now India has a
heavy industrial base and also has several sugar mills.
Hence the earlier regulatory laws relating to the sugar
E industry, including the requirement of a licence, have
evidently served their purpose and are no longer required
and may in fact be obstructing the growth of industry in
India now. The policy of liberalization began in the early
1990s. On 24th July 1991, the Government of India
F announced its liberalized "Industrial Policy 1991 ". On
25th July, 1991, the first notification i.e. Notification
No.477{E) came to be issued by virtue of which 20 out of
the 38 Scheduled industries were taken out of the
purview of Section 10, 11, 11 A and 13 of the Act. The
G structure of this notification was that it appended three
negative lists {Schedule I, II and Ill) and the scheduled
industries not specified in these three lists were
obviously within the scope of the exemption. These lists
were changed from time to time during the period 1991-
2010 and as things stand at present only a handful of
H industries now remain in these negative lists. As far as
BAJAJ HINDUSrAN LTD. v. SIR SHADI LAL 159
ENTERPRISES LTD.
the sugar industry is concerned, a Parliamentary A
Committee was appointed which recommended de-
licensing of the sugar industry as early as in 1996. Later,
pursuant to certain directions of the Allahabad High
Court yet another Committee was appointed (the
Mahajan Committee), which also supported reform of the 8
licensing system. In August 1998, considering the
recommendations of these two reports, the Government
of India issued Press Note 12 dated 31.8.1998 and the
formal notification on 11.9.1998 under Section 298(1) of
the Act. A perusal of the background in which de- C
licensing of sugar industry ~as done shows that it was
a well considered step which was done having regard to
the stage of development of the industry. [Paras 15 to 17]
[169-B-H; 170-A-C]
Ojas Industries P. Ltd. vs. Oudh Sugar Mills Ltd & Ors D
(2007) 4 sec 723 - relied on.
Ojas Industries P. Ltd. vs. Union of India & Ors 2006 (86)
DRJ 593- referred to
2.1. Section 298 provides that having regard to any E
of the four specified factors, if the Central Government is
of the opinion that it would not be in public interest to
apply "all or any" of the provisions of this Act to a
scheduled industry, it may by notification in the official
gazette exempt (conditionally or otherwise) any industrial F
undertaking or any class of industrial undertakings, or
any scheduled industry or class of scheduled industries.
The four specified factors on the basis of which the power
may be exercised are as follows: a) the smallness of the
number of workers employed; or b) the amount invested G
in any industrial undertaking; or c) the desirability of
encouraging small undertakings generally; or d) the
stage of development of any scheduled industry. Sub-
section 2 ofthe Section 298 also confers upon the
Central Government an express power of cancellation of H
160 SUPREME COURT REPORTS [2010] 15 (ADDL.) S.C.R.
A such exemption. Sufficient guidelines have been
provided by the legislature for the Government in this
connection. The power conferred under Section 298 is
not tainted by the vice of excessive delegation because
the essential legislative policy is specified in the preamble
8 to the IDR Act and is writ large throughout the provisions
of the Act. [Paras 28 and 29, 30) [176-D-H; 177-A]
P. J. Irani vs. State of Madras (1962) 2 SCR 169;
Sitaram Bishambar Dayal vs. State of UP. (1972) 4 SCC
485; Mahe Beach Trading Co. and Ors. vs. Union Territory
C of Pondicherry and Ors. (1996) 3 SCC 741; State of Tamil
Nadu vs. K. Sabhanayagam (1998) 1 SCC 318; Consumer
Action Group vs. State of Tamil Nadu (2000) 7 SCC 425;
Kishan Prakash Sharma and Ors. vs. Union of India and Ors.
(2001) 5 sec 212 - Relied on
D
2.2. The legislative history of Secti,on 298 clearly
establishes the legislative intention to confer a wide
power of exemption upon the Central Government.
Section 28, as was originally enacted, conferred upon the
E Central Government, in general terms, the power to
exempt any scheduled industry or any industrial
undertaking from the operation of all or any provisions
of this Act. There was no further provision of any
parliamentary control (by way of placing the exemption
notifications before parliament for its approval or
F otherwise) contemplated in the said original Section.
Amendments were made to the IDR in 1953 when Section
29B was inserted in substitution of Section 28. The
amended provision contemplated the grant of exemption
on the four factors. In 1956 further amendments were
G made by way of insertion of Sub-section 2, which confers
the power of cancellation of exemptions. [Para 31) [177-
F-H; 178-A-B]
Shree Vindhya Paper Mills Case AIR (1983) Born 270
H - Disapproved.
BAJAJ HINDUSTAN LTD. v. SIR SHADI LAL 161
ENTERPRISES LTD.
3. It is well settled that the executive power of Union A
of India is co-extensive with the legislative power vide
Article 73(1) of the Constitution. Therefore, the notification
under Section 298 was sufficient for this purpose and it
was not necessary to amend the Act to de-license the
sugar industry. There is nothing in the 1951 Act which B
required a notification under Section 298(1) to be
approved by Parliament. Also, whether it is in the public
interest to issue such a notification is ordinarily for the
Government to decide, and the court should exercise
judicial restraint in this connection. Whether there should c
be licensing of an industry or not is for the executive
authorities to decide. [Paras 32, 34 and 37] [178-G-H; 179-
E]
Shri Sitaram Sugar Co. Ltd. vs. Union of India AIR 1990
SC 1277; India Cement Ltd. vs. Union of India AIR 1991 SC D
724- Relied on.
New State Ice Co. vs. Liebmann 285 U.S. 262 (1932);
Secretary of Agriculture vs. Central Roig Refining Co. (1949)
338 US 604 (617) - Referred to. E
4.1. The court cannot sit in judgment over the
wisdom of the policy of the legislature or the executive.
The court can, however, interfere with administrative
decisions only within narrow limits e.g. when there is
F
clear violation of the statute or a constitutional provision,
or there is arbitrariness in the Wednesbury sense. It is the
administrators and legislators who are entitled to frame
policies and take such administrative decisions as they
think necessary in the public interest. The court should
not ordinarily interfere with policy decisions, unless G
clearly illegal. Economic and fiscal regulatory measures
are fields where Judges should encroach upon very
warily as Judges are not experts in these matters. The
impugned policy parameters were fixed by experts in the
Central Government, and it is not ordinarily open to this H
162 SUPREME COURT REPORTS [2010] 15 (ADDL.) S.C.R.
A Court to sit in appeal over the decisions of these experts.
[Para 22, 42, 43) [173-H; 181-H; 182-A-C]
Ba/co Employees' Union (Regd.) vs. Union of India and
Ors. 2002(2) SCC 333; MP. Oil Extraction vs. State of M.P.
B 1997(7) SCC 592; Ugar Sugar Works Ltd. vs. Delhi
Administration and Ors. (2001) 3 SCC 635; Bhavesh D.
Parish and Ors. vs. Union of India and Anr. (2000) 5 SCC 471;
Netai Bag and Ors. vs. State of West Bengal and Ors. (2000) ...
8 SCC 262; P. T. R. Exports (Madras) Pvt. Ltd. vs. Union of
C India and Ors. 1996(5) sec 268 - relied on.
4.2. The power to lay policy by executive decisions
or by legislation includes power to withdraw the same
unless it is by ma/a fide exercise of power, or the decision
or action taken is in abuse of power. The doctrine of
D .. legitimate expectation plays no role when the appropriate
authority is empowered to take a decision by an
executive policy or under law. The Government would
take diverse factors for formulating the policy in the
overall larger interest of the economy of the country.
E When the Government is satisfied that change in the
policy was necessary in the public interest, it would be
entitled to revise the policy and lay down a new policy.
Certain matters are by their nature such as best be left
to experts in the field. There should be judicial restraint
F in fiscal and economic regulatory measures. All
administrative decisions in the economic and social
spheres are essentially ad hoc and experimental. Since
economic matters are extremely complicated this
·inevitably entails special treatment for distinct social
G phenomena. The State must, therefore, be left with wide
latitude in devising ways and means of imposing fiscal
regulatory measures, and the court should not, unless
compelled by the statute or by the Constitution, encroach
into this field. It will make no difference whether the policy
H
BAJAJ HINDUSTAN LTD. v. SIR SHAD! LAL 163
ENTERPRISES LTD.
has been framed by the legislature or the executive and A
in either case there should be judicial restraint. The Court
can invalidate an executive policy only when it is clearly
violative of some provisions of the Statute or Constitution
or is shockingly arbitrary but not otherwise. The
impugned Press Note and Notification were validly issued B
under Section 298 of the Act. Hence the impugned
judgment cannot be sustained and it is hereby set aside.
[Para 44, 46, 48, 49] [182-C-F; 183-G-H; 184-A-D]
Prag Ice & Oil Mills vs.· Union of India AIR 1978 SC 1296; C
Shri Sitaram Sugar Co. Ltd. vs. Union of India (1990) 3 SCC
223; Divisional Manager, Aravali Golf Club & Anr. vs.
Chander Hass & Anr. JT (2008) 3 SC 221 - Relied on
Case Law Refernce:
D
2006 (86) DRJ 593 Referred to Para 20
(2007) 4 sec 123 Referred to Para 20
2002(2) sec 333 Relied on . Para 23
1997(7) sec 592 Relied on Para 25 E
(2001) 3 sec 635 Relied on Para 26
(2000) 5 sec 471 Relied on Para 26
(2000) 8 sec 262 Relied on Para 26 F
1996(5) sec 268 Relied on Para 27
(1962) 2 SCR 169 Relied on Para 30
(1972) 4 sec 485 Relied on Para 30
G
(1996) 3 sec 741 Relied on Para 30
(1998) 1 sec 318 Relied on Para 30
(2000) 1 sec 425 Relied on Para 30
H
164 SUPREME COURT REPORTS [2010] 15 (ADDL.) S.C.R.
A (2001) 5 sec 212 Relied on Para 30
AIR (1983) Born 270 Disapproved Para 31
285 U.S. 262 (1932) Referred to Para 38
AIR 1990 SC 1277 Relied on Para 39
B
AIR 1991 SC 724 Relied on Para 40
(1949) 338 us 604 Referred to Para 41
AIR 1978 SC 1296 Relied on Para 45
c
(1990) 3 sec 223 Relied on Para 45
JT (2008) 3 SC 221 Relied on Para 50
CIVIL APPELLATE JURISDICTION : Civil Appeal No.
D 5856 of 2005.
From the Judgment & Order dated 24.08.2005 of the High
Court of Judicature at Allahabad in Civil Misc. Writ Petition No.
36685 of 2004.
E WITH
SLP (C) No. 1398 of 2006.
C.A. Nos. 5857 & 5858 of 2005.
F K.K. Venugopal, Rajeev Dutta, L. Nageshwar Rao, Sudhir
Ch. Agarwal, Syed Shahid Husain Rizavi, Sanjeev K. Singh,
Uday Kumar, Roma Ahuja, D.K. Pradhan, Neha Goyal, Noor
Afshan Sano, Somanadri Goud, Sameer Parekh, Parijat Sinha,
Reshmi Rea Sinha, Anil Kumar Mishra, Vikram Ganguly, Ravi
G Prakash, Mehrotra Sandeep Singh, Vibhu Tiwari, Manu
Agarwal, Ruby Singh Ahuja, Abeer Kumar, Anil Dutt, Sanjeev
K. Kapoor, Narender Kmar Verma for the Appellants.
The Judgment of the Court was delivered
H
BAJAJ HINDUSTAN LTD. v. SIR SHADI LAL 165
ENTERPRISES LTD.
SLP © No.1398 of 2006 A
1. As prayed by learned counsel Mr. Parijat Sinha this
petition is dismissed as withdrawn.
Civil Appeal No.5856 of 2005
B
2. These petitions have been filed against the judgment
and order dated 24.8.2005 in Civil Misc. Writ Petition No.36685
of 2004 of the High Court of Judicature at Allahabad
3. By that decision the High Court has quashed the Press c
Note Number 12 dated 31.8.1998 and Notification SO 808(E)
dated 11.9.1998, i"ued by the Central Government, by which
the Sugar Industry was de-licensed under Section 29B of the
Industries (Development and Regulation) Act, 1951 (hereinafter
referred to as 'the Act'.) '
D
4. As a consequence, the High Court has debarred the
respondent number 6 from establishing a sugar industry without
obtaining a licence under Section 11 of the Act.
5. The High Court has also cancelled the permission, if E
any, granted to the respondent number 5 to 6 for purchasing
and/or acquiring land for the purposed of establishing new sugar
industries without licence.
6. It is submitted by learned counsel for the appellant that
the effect of the impugned judgment and order quashing of the F
Notification dated 11.9.1998 and the Press Note dated
31.8.1998 is that the sugar industry in India has virtually been
thrown back into the era of 'License Raj', nullifying the efforts
of the Government of India to open up the economy to
prospective investors. Also, all the sugar industries established G
throughout India after 11.9.1998 (as per the available data they
are 100 in number) have become illegal. Industrial development,
particularly in the sugar producing States, may well come to a
grinding halt. An investment of about Rs.4000 crores in the
sugar industry in U.P. alone has been jeopardized. The H
166 SUPREME COURT REPORTS (2010] 15 (ADDL.) S.C.R.
A petitioner herein alone has invested about Rs.600 crores in the
sugar industry in the State of U.P. after the said Notification and
Press note were issued. Further, the petitioner has committed
an investment of an amount of Rs. 700 crores in the sugar
industry in U.P. It is submitted that lacs of farmers throughout
B India and particularly in the State of U.P. will suffer as they would
be forced to sell their cane at lesser price to the existing sugar
mills and those who are not even able to crush their assigned
quantity of sugarcane and make timely payment of cane to the
farmers, besides rendering thousands of workers directly
c employed in sugar factories jobless. Also, lacs of families
indirectly attached with industries ancillary to the sugar industry
will be severely affected as a result.
7. The petitioner acting bonafide and after complying with
all the requirements stipulated in the Press Note/Notification,
D is setting up seven Sugar Factories at various places in U.P.
with an aggregate investment of nearly Rs.1300 crores with a
capacity of 7000 tonnes crushed per day (TCD) each. The
petitioner has already completed and commenced production
in one factory at Kinouni, Meerut, which the petitioner had set
E up in a record seven months period on 5.11.2004 and further
three factories are already completed and ready to commence
production in September, 2005 including the one which is under
challenge in the writ petition in which the impugned judgment
has been passed. Further, the petitioner is expecting to
F complete the commissioning of production in another three
factories as fast as possible. The three factories are ready to
operate before the on set of the forthcoming crushing season
in September, 2005 to enable the farmers to take full economic
advantage thereof. The remaining three factories shall
G commence production in 2006. The petitioner has already
spent about Rs.600 crores on the purchase of land, plant and
machinery and other miscellaneous expenditure. Further, the
construction of buildings of the other three sugar factories and
integrated distillery for production of Ethanol etc. is in full swing
H on which a further sum of Rs.700 crores is committed to be
BAJAJ HINDUSTAN LTD. v. SIR SHADI LAL 167
ENTERPRISES LTD.
invested for which the petitioner had also made GDR issue of A
US$ 110 million and committed in the international market. It
is submitted that all the projects of the petitioner would be
affected by the impugned judgment.
8.. Jt is submitted that in the State of U.P., the sugar industry B
is one of the most important industries, with sugarcane being
the chief cash crop. Thousands of people have been provided
employment in this industry alone. Nearly half of India's
sugarcane area is situated in U.P. alone, which constitutes
roughly 42% of the total sugarcane production in the country. ·
However, despite adequate availability of sugarcane area, U.P. C
still lags behind Maharashtra in the production of sugar. Even
though the demand of sugar in the country has increased
.manifold but the sugar industry in U .P. has remained stagnant
over a long period of time due to various reasons including
sickness of uneconomic and unviable units mainly in the D
Government and the cooperative sector. Due to low sugarcane
crushing capacity, the farmers were forced to sell their cane to
less remunerative uses. The petitioner's sugar projects have
brought a new hope to the farmers at large.
E
9. Sugar, is item number 25 of the first Schedule of the
Industries (Development and Regulation) Act, 1951. Hence, no
one could set up a sugar industry without a licence as per
Section 11 of the Act.
10. The Industries (Development and Regulation) Act was F
passed in 1951. The statements of objects and reasons of the
Act states as follows :
"The object of this Bill is to provide the Central
Government with the means of implementing their industrial G
policy which was announced in their Resolution No.1 (3)-
44(13) 48, dated 6th April, 1948 and approved by the
Central Legislature. The Bill brings under Central control
the development and regulation of a number of important
industries, the activities of which affect the country as a H
168 SUPREME COURT REPORTS [2010) 15 (ADDL.) S.C.R.
A whole and the development of which must be governed by
economic factors of all-India import. The planning of future
development on sound and balanced lines is sought to be
secured by the licensing of all new undertakings by the
Central Government. The Bill confers on Government
B power to make rules for the registration of existing
undertakings, for regulating the production and
development of the industries in the Schedule and for
consultation with Provincial Governments on these
matters." ............ .
c 11. Section 2 of the Act states as follows :
"2. Declaration as to expediency of control by the
Union - It is hereby declared that it is expedient in the
public interest that the Union should take under its control
D the industries specified in the First Schedule."
12. Section 3(i) of the Act states as follows :
"(i) "scheduled industry" means any of the industries
specified in the First Schedule."
E
13. Sugar is mentioned in item no.25 of the First Schedule
to the Act.
14. The historical background is that up to about 1930 there
F were practically no sugar industries in India and we had to
import all our sugar from foreign countries like West Indies,
Jawa, etc. Hence around 1930 the British Government invited
some businessmen and requested them to set up sugar
industries in India so that we can produce our own sugar. These
businessmen told the British Government that they were willing
G to set up such industries provided they were assured of regular
supply of sugarcane. It may be mentioned that sugarcane is the
main raw material for manufacture of sugar. If an adequate
supply of sugarcane was not available to the sugar mills the
mills would have to close down entailing heavy losses to the
H proprietors. The Government accepted this request and framed
BAJAJ HINDUSTAN LTD. v. SIR SHADI LAL 169
ENTERPRISES LTD.
laws for ensuring a regular supply of sugarcane to any sugar A
mill established in India and made various regulations for the
sugar industry.
15. The 1951 Act placed the sugar industry in the First
Schedule to the Act, which meant that no sugar industry could 8
be set up without a licence from the Central Government.
16. Since independence the situation has totally changed
in India. Now India has a heavy industrial base and also has
several sugar mills. Hence the earlier regulatory laws relating
to the sugar industry, including the requirement of a licence, C
have evidently served their purpose and are no longer required
and may in fact be obstructing the growth of industry in our
country now. Hence the policy of liberalization began in the
early 1990s and it appears that it was in pursuance of the
liberalization policy that the impugned Press Note and D
Notification were issued.
17. A perusal of the background in which de-licensing of
sugar industry was done shows that it was a well considered
step which was done having regard to the stage of development
E
of the industry. This background is:
(a) On 24th July 1991, the Government of India announced
its liberalized "Industrial Policy 1991".
(b) On 25th July, 1991, the first notification i.e. Notification F
No.477(E) came to be issued by virtue of which 20 out of
the 38 Scheduled industries were taken out of the purview
of Section 10, 11, 11A & 13 of the Act. The structure of
this notification was that it appended three negative lists
(Schedule I, II and Ill) and the scheduled industries not G
specified in these three lists were obviously within the
scope of the exemption.
These lists were changed from time to time during
the period 1991-2010 and as thitlgs stand at present only
a handful of industries now remain in these negative lists. HI
170 SUPREME COURT REPORTS (2010] 15 (ADDL.) S.C.R.
A (c) As far as the sugar industry is concerned, a
Parliamentary Committee was appointed which
recommended de-licensing of the sugar industry as early
as in 1996. Later, pursuant to certain directions of the
Allahabad High Court yet another Committee was
B appointed (the Mahajan Committee), which also supported
reform of the licensing system. In August 1998, considering
the recommendations of these two reports the Government
of India issued Press Note 12 dated 31.8.1998 de-
licensing the sugar industry, subject to the condition that
c there would be a minimum of 15 km distance between two
sugar mills.
The Press Note was then followed by the formal
notification on 11.9.1998, issued under Section 298(1) of
the Act.
D
18. The Press Note and Notification read as follows :-
"PRESS NOTE
Subject : De-licensing of Sugar industry.
E
1. The Government has further viewed the list of
industries under compulsory licensing and has
decided to delete sugar industry from the list of
industries requiring compulsory licensing under
F provisions of the Industries (Development and
Regulation) Act, 1951. However, in order to avoid
unhealthy competition among sugar factories to
procure sugarcane, a minimum of 15 KM would
continue to be observed between an existing sugar
G mill and a new mill by exercise of power under
Sugarcane (Control) Order, 1966.
2. The entrepreneurs who wish to avail themselves of
the de-licensing of sugar industry would be required
to file an Industrial Entrepreneurs Memoranda (IEM)
H with the Secretariat of Industrial Assistance in the
BAJAJ HINDUSTAN LTD. v. SIR SHADI LAL 171
ENTERPRISES LTD.
Ministry of Industry as laid down for all de-licensing A
Industries in terms of the Press Note dated 2nd
August, 1991, as amended from time to time.
3. Entrepreneurs who have been issued letter(s) of
intent (LOI) for manufacture of sugar need not file
8
an initial IEM. In such cases, the LOI holder shall only
file part B of the LOI at the time of commencement
of commercial production against the LOI issued by
them. It is, however, open to entrepreneurs to file
an initial IEM (in lieu of the LOI/Industrial Licence C
held by them) if they so desire, whenever any
variation from the conditions and parameters
stipulated in the LOI/Industrial Licence is
contemplated."
"NOTIFICATION D
(266) Ministry of Industry (Department of Industrial Policy
and Promotion) Notification No.S.0.808(E) dated
September 11, 1998 published in the Gazette of India,
Extra, Part II, Section 3 (ii) dated 14th September, 1998 E
p.2, no.599 (F.No.10(13)/96 l.P.).
In exercise of the powers conferred by sub-section (1) as
Section 29-B of the Industries (Development and
Regulations) Act, 1951 (65 of 1951), the Central
Government hereby makes the following further F
amendment in the notification of the Government of India
in the Ministry of Industry (Department of Industrial
Development Number S.0.477(E) dated the 25th July,
1991, namely :-
G
In Schedule II to the said notification, item 4, relating to
Sugar and the entries thereunder shall be omitted."
19. Section 298(1) of the Act states :
"29-8. Power to exempt in special cases : H
172 SUPREME COURT REPORTS [2010] 15 (ADDL.) S.C.R.
A (1) If the Central Government is of opinion, having regard
to the smallness of the number of workers employed or to
the amount invested in any industrial undertaking or to the
desirability of encouraging small undertakings generally or
to the stage of development of any scheduled industry,
B that it would not be in public interest to apply all or any of
the provisions of this Act thereto, it may by notification in
the Official Gazette, exempt, subject to such conditions as
it may think fit to impose, any Industrial undertaking or
class of industrial undertakings or any scheduled industry
c or class of scheduled industries as it may specify in the
notification from the operation of all or any of the provisions
of this Act or any rule or order made thereunder,"
20. It may be mentioned that after the impugned judgment
D of the High Court dated 24.8.2005, several developments have
taken place relating to the sugar industry which have a
substantial effect on the issues involved in these appeals.
These are as follows :
(i) The High Court of Delhi in a case reported as Ojas
E Industries P. Ltd. vs. Union of India & Ors 2006 (86) DRJ
593 upheld the validity of the Press Note dated 31.08.98
being a policy of the Government of India under Article 73
of the COi. Therefore Delhi High court upheld the validity
of the Press Note dated 31.08.98 which was quashed by
F the Allahabad HC on 24.08.05.
(ii) Thereafter the Government of India in exercise of its
power under Section 3 of the Essential Commodities Act,
1955 amended the Sugarcane (Control) Order, 1966 by
inserting Clauses 6A to 6E vide the Sugarcane (Control)
G Amendment Order, 2006, inter alia, laying down the
"effective steps" which the applicant is required to take
such as purchase of required land in the name of the mill,
payment of advance and opening of LOC with suppliers,
commencement certificate of civil work and construction
H of building, sanction of requisite term loans from the banks
BAJAJ HINDUSTAN LTD. v. SIR SHAD! LAL 173
ENTERPRISES LTD.
or financial institutions and any other steps prescribed by A
the Central Government in this regard.
(iii) This Court by its judgment dated 02.04.07 in Ojas
Industries P. Ltd. vs. Oudh Sugar Mills Ltd & Ors (2007)
4 SCC 723 considered the. Press Note dated 31.08.98, B
the amendment of Sugarcane Control Order, 2006 and the
liberalization policy of the Government of India in sugar
industry. This Court after analyzing the provisions of the
Press Notes in respect of prescribing minimum distance
between two sugar mills, and the new Sugarcane Control
Order, 2006 held that the defect pointed out by the Delhi C
High Court in paragraph 63 of its judgment has been
removed by the Government of India by bringing in the
amendment in 2006. This Court held that this amendment
is clarificatory in nature and retrospective in operation and
shall apply to all cases pending in various courts. D
/
21. In view of the judgment of this Court in Ojas Industries
(supra) upholding the validity of the Press Note prescribing
distance norms and subsequent amendments in 2006 in
Sugarcane Control Order 1966 and making it retrospective, the E
issues involved in the present case have been substantially
decided. The challenge of the writ petitioner in the High Court
was based on the setting up of a sugar mill in its vicinity (though
beyond 15 kms away) because of the policy of de-licensing
prescribed under Notification dated 11.09.98 issued in exercise F
of powers under Section 29(8) (1) of the IDR Act, 1951. This
Court has upheld the distance norms i.e. a minimum distance
of 15 kms between two mills retrospectively. The main thrust
of the petitioner's challenge to the de-licensing policy thus
disappears.
G
22. It is settled law that in the areas of economics and
commerce, there is far greater latitude available to the
executive than in other matters. The Court cannot sit in judgment
over the wisdom of the policy of the legislature or the executive.
H
174 SUPREME COURT REPORTS [2010) 15 (ADDL.) S.C.R.
A 23. Thus in Ba/co Employees' Union (Regd.) vs. Union
of India and Ors. 2002(2) sec 333 it was observed (vide
paragraph 92 and 93) :
"92. In a democracy, it is the prerogative of each elected
Government to follow its own policy. Often a change in
B
Government may result in the shift in focus or change in
economic policies. Any such change may result in
adversely affecting some vested interests. Unless any
illegality is committed in the execution of the policy or the
same is contrary to law or mala fide, a decision bringing
c about change cannot per se be interfered with by the court.
93. Wisdom and advisability of economic policies are
ordinarily not amenable to judicial review unless it can be
demonstrated that the policy is contrary to any statutory
D provision or the Constitution. In other words, it is not for
the courts to consider relative merits of different economic
policies and consider whether a wiser or better one can
be evolved." ............... .
24. In the same decision in paragraph 39 it was observed
E
"39. In Premium Granites vs. State of T.N., 1994(2) SCC
691 while considering the Court's powers in interfering with
the policy decision, it was observed at page 715 as under:
F (SCC para 54)
"54. It is not the domain of the Court to embark upon the
unchartered ocean of public policy in an exercise to
consider as to whether a particular public policy is wise
G or a better public policy can be evolved. Such exercise
must be left to the discretion of the executive and
legislative authorities as the case may be."
25. In paragraph 42 of the aforesaid decision this Court
quoted from its earlier decision in M.P. Oil Extraction vs. State
H of M.P. 1997(7) sec 592 as follows :
BAJAJ HINDUSTAN LTD. v. SIR SHAD! LAL 175
ENTERPRISES LTD.
" ........................ The executive authority of the State A
must be held to be within its competence to frame a policy
for the administration of the State. Unless the policy
framed is absolutely capricious and, not being informed
by any reason whatsoever, can be clearly held to be
arbitrary and founded on mere ipse dixit of the executive B
functionaries thereby offending Article 14 of the
Constitution or such policy offends other constitutional
provisions or comes into conflict with any statutory
provision, the Court cannot and should not outstep its
limit and tinker with the policy decision of the executive c
function of the State. This Court, in no uncertain terms, has
sounded a note of caution by indicating that policy decision
is in the domain of the executive authority of the State and
the Court should not embark on the unchartered ocean of
public policy and should not question the efficacy or D
otherwise of such policy so long the same does not offend
any provision of the statute or the Constitution of India. The
supremacy of each of the three organs of the State i.e.
legislature, executive and judiciary in their respective fields
of operation needs to be emphasized. The power of E
judicial review of the executive and legislative action must
be kept within the bounds of constitutional scheme so that
there may not be any occasion to entertain misgivings
about the role of the judiciary in outstepping its limit by
unwarranted judicial activism being very often talked of in
these days. The democratic set-up to which the polity is F
so deeply committed cannot function properly unless each
of the three organs appreciate the need for mutual respect
and supremacy in their respective fields."
(emphasis added) G
26. The same view has been taken by this court in Ugar
Sugar Works Ltd. vs. Delhi Administration and Ors. (2001) 3
SCC 635 (vide para 18), Bhavesh D. Parish and Ors. vs.
Union of India and Anr. (2000) 5 sec 471 (vide para 23 and
H
176 SUPREME COURT REPORTS [2010] 15 (ADDL.) S.C.R.
A 24), Netai Bag and Ors. vs. State of West Bengal and Ors.
(2000) 8 sec 262 (vide para 20), etc ..
27. In P. T.R. Exports (Madras) Pvt. Ltd. vs. Union of India
and Ors. 1996(5) SCC 268 (vide para 3 and 5) this Court held
8 that the power to frame a policy by executive or legislative
decision included the power to withdraw the same.
28. In the present case the de-licensing has been done
under Section 298 of the Act and we see no illegality in the
same.
c
29. In our opinion the High Court has placed an erroneous
interpretation on the language of Section 298. Section 298
provides that having regard to any of the four specified factors,
if the Central Government is of the opinion that it would not be
0 in public interest to apply "all or any" of the provisions of this
Act to a scheduled industry, it may by notification in the official
gazette exempt (conditionally or otherwise) any industrial
undertaking or any class of industrial undertakings, or any
scheduled industry or class of scheduled industries. The four
E specified factors on the basis of which the power may be
exercised are as follows :
(a) the smallness of the number of workers employed
or
F (b) the amount invested in any industrial undertaking or
(c) the desirability of encouraging small undertakings
generally or
(d) the stage of development of any scheduled industry.
G
30. A plain reading of Section 298 shows that having
regard to the stage of development of any schedule industry
if the Central Government is of the opinion that there should be
an exemption from some or all of the provisions of the Act, it
H can issue an appropriate notification for this purpose. Sub-
BAJAJ HINDUSTAN LTD. v. SIR SHADI LAL 177
ENTERPRISES LTD.
section 2 of the Section 298 also confers upon the Central A
Government an express power df cancellation of such
exemption. In our opinion sufficient guidelines have been
provided by the legislature for the Government in this
connection. The power conferred under Section 298 is in our
opinion not tainted by the vice of excessive delegation because 8
the essential legislative policy is specified in the preamble to
the IDR Act and is writ large throughout the provisions of the
Act. The grounds on which exemption from licensing can be
granted - one of them being the stage of development of the
industry - are also specified in Section 298. The legislative c
policy having been clearly stated, in our opinion there is no
excessive delegation. See in this connection P.J. Irani vs. State
of Madras (1962) 2 SCR 169at pages 179-180, Sitaram
Bishambar Dayal vs. State of UP. (1972) 4 SCC 485 (vide
para 5 and 7), Mahe Beach Trading Co. and Ors. vs. Union D
Territory of Pondicherry and Ors. (1996) 3 SCC 741 (vide para
13), State of Tarril Nadu vs. K. Sabhanayagam (1998) 1 SCC
318 (vide para 14, 19, 20 and 21), Consumer Action Group
vs. State of Tamil Nadu (2000) 7 SCC 425 (vide para 5-18,
41 reviews case law on delegated legislation right from F. N. E
8alsara) and. Kish an Prakash Sharma and Ors. vs. Union of
India and Ors: (2001) 5 SCC 212 (vide para 18-20).
31. The legislative history of Section 29B clearly
establishes the legislative intention to confer a wide power of
exemption upon the Central Government. F
(a) Section 28, as was originally enacted, conferred
upon the Central Government, in general terms, the
power to exempt any scheduled industry or any
industrial undertaking from the operation of all or G
any provisions of this Act. There was no further
provision of any parliamentary control (by way of
placing the exemption notifications before
parliament for its approval or otherwise)
contemplated in the said original Section.
H
178 SUPREME COURT REPORTS [2010] 15 (ADDL.) S.C.R.
A (b) Amendments were made to the IDR in 1953 when
Section 29B was inserted in substitution of Section
28. The amended provision contemplated the grant
of exemption on the four factors indicated
hereinbefore. However. no power of reservation for
B the Small Scale Sector was contemplated in these
provisions. In 1956 further amendments were made
by way of insertion of Sub-section 2, which confers
the power of cancellation of exemptions.
(c) The Central Government sought to make
c reservation of certain industries for the Small Scale
Sector. The Bombay High Court in Shree Vindhya
Paper Mills Case AIR (1983) Born 270 held that
Section 29B confers power to exempt, but not to
reserve. Hence it was held that such reservation
D was ultra-vires Section 29B. To overcome the effect
of this judgment Section 29B was amended again
in 1984 by inserting the provisions of Sub-section
2(A) to 2(H) including a validating provision for
validating all reservations made on or from 19th
E February, 1970. In the amended provision, Section
2(H) contemplated laying before each House of
Parliament, the notified orders made under Sub-
section 2(A). It is significant that no similar
requirement was contemplated even then, in
F relation to notified orders issued under Sub-Section
(1) granting exemption.
32. The High Court has in the impugned judgment held that
the de-licensing could only be done by the legislature and not
G by the executive. We do not agree. It is well settled that the
executive power of Union of India is co-extensive with the
legislative power vide Article 73(1) of the Constitution. Hence
in our opinion it was not necessary to amend the Act to de-
license the sugar industry. The notification under Section 29B
H was sufficient for this purpose.
BAJAJ HINDUSTAN LTD. v. SIR SHADI LAL 179
ENTERPRISES LTD.
33. In the impugned judgment the High Court has A
observed:
"Licensing is a part of regulation of the scheduled
industry. Therefore licensing policy of the Government
cannot be said not to be in the public interest. De-licensing B
policy largely affects the interest of the people. Somebody
may say for socialism or somebody may say for
globalization, but the thought of majority people has to be
reflected in the House by the majority vote. Then and then
alone the policy can be accepted as a law by its
amendment. Therefore, without ascertaining the pros and C
cons on that line mere issuance of notification by the pen
of the executive is an action without jurisdiction and as
such illegal."
34. With respect we cannot agree with this observation: D
There is nothing in the 1951 Act which required a notification
under Section 29B(1} to be approved by Parliament. Also,
whether it is in the public interest to issue such a notification is
ordinarily for the Government to decide, and the Court should
exercise judicial restraint in this connection. Whether there E
should be licensing of an industry or not is for the executive
authorities to decide.
35. The High Court has further observed :
"The necessity of de-licensing came in the mind of F
the Government by the passage of time since when the
waves of liberalization started coming. The Government
was considering the same and possibly for this reason
reports from the Advisory Committees were sought for. But
after placement before the Lok Sabha and Rajya Sabha G
what prompted them not to place before the Parliament,
but issue a Press Note and Notification directly omitting
the sugar industry from the list of compulsorily licensable
industry is fishy state of affairs. Therefore, the eleme'nts of
illegality, unfair, play, adopting back door proc'ess, H
180 SUPREME COURT REPORTS [2010] 15 (ADDL.) S.C.R.
A arbitrariness, malafides, and abuse of power cannot be
ruled out."
36. With respect to the above observation we may say that
the High Court has probably overlooked that the Lok Sabha and
B Rajya Sabha together constitute Parliament in India. Also, as
already stated above, the 1951 Act does not require a
notification under Section 29B(1) to be approved by Parliament.
Hence there was nothing fishy about the impugned notification.
To say that elements of illegality, unfair play etc. cannot be ruled
·out is really acting on conjectures and surmises, not on
C evidence.
37. The High Court has held that exemption from licensing
can be granted under Section 29B to small industries but not
to large industries. With respect we cannot agree. A perusal
D of Section 29B(1 ), which has been quoted above, shows that
a notification under the said provision can be issued in respect
to four categories. Smallness of the industry, is only one of such
categories. The fourth category viz. 'the stage of development
of any scheduled industry' is very wide, and thus gives wide
E power to the Central Government to de-license even large
industries.
38. In his dissenting judgment in New State Ice Co. vs.
Liebmann 285 U.S. 262 (1932) Mr. Justice Brandeis, the
celebrated Judge of the U.S. Supreme Court, observed that the
F Government must be left free to engage in social experiments.
Progress in the social sciences, even as in the physical
sciences, depends on "a process of trial and error" and Courts
must not interfere with necessary experiments. In the same
decision Justice Brandeis also observed :
G
"To stay experimentation in things social and
economic is a grave responsibility. Denial of the right to
experiment may be fraught with serious consequences to
the Nation." (See also 'The Legacy of Holmes and
H Brandeis' by Samuel Konefsky).
BAJAJ HINDUSTAN LTD. v. SIR SHADI LAL 18~
ENTERPRISES LTD.
39. In the Constitution bench decision of the Supreme Court A
in Shri Sitaram Sugar Co. Ltd. vs. Union of India AIR 1990
SC 1277 it was observed :
"What is best for the sugar industry and in what manner
the policy should be formulated and implemented, bearing 8
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 C
power of judicial review."
40. It was held in the above decision as well as in India
Cement Ltd. vs. Union of India AIR 1991 SC 724 that even if
some person~ are at a disadvantage and suffered losses on
account of formulation and implementation of the Government D
policy that is not by itself sufficient ground for interference by
the Court.
41. In Secretary of Agriculture vs. Central Roig Refining
Co. (1949) 338 US 604 (617): 94 Law Ed. 381 to 392, Mr. E
Justice Frankfurter of the U.S. Supreme Court observed :
"Congress was confronted with the formulation of
policy peculiarly within its wide swath of discretion. It would
be a singular intrusion of the judiciary into the legislative
process to extrapolate, restrictions upon the formulation of F
such an economic policy from those deeply rooted notions
of justice which the Due Process Clause
expresses ............. "
42. We should not be understood to have meant that the G
judiciary should never interfere with administrative decisions.
However, such interference should be only within narrow limits
e.g. when there is clear violation of the statute or a constitutional
provision, or there is arbitrariness in the Wednesbury sense. It
is the administrators and legislators who are entitled to frame H
182 SUPREME COURT REPORTS (2010] 15 (ADDL.) S.C.R.
A policies and take such administrative decisions as they think
necessary in the pulilic interest. The Court should not ordinarily
interfere with policy decisions, unless clearly illegal.
43. Economic and fiscal regulatory measures are a field
8 where Judges should encroach upon very warily as Judges are
not experts in these matters. The impugned policy parameters
were fixed by experts in the Central Government, and it is not
ordinarily open to this Court to sit in appeal over the decisions
of these experts. We have not been shown any violation of law
C in the impugned notification or Press Note.
44. The power to lay policy by executive decisions or by
legislation includes power to withdraw the same unless it is by
mala fide exercise of power, or the decision or action taken is
in abuse of power. The doctrine of legitimate expectation plays
D no role when the appropriate authority is empowered to take a
decision by an executive policy or under law. The court leaves
the authority to decide its full range of choice within the executive
or legislative power. In matters of economic policy, it is settled
law that the court gives a large leeway to the executive and
E the legislature. Granting licences for import or export is an
executive or legislative policy. The Government would take
diverse factors for formulating the policy in the overall larger
interest of the economy of the country. When the Government
is satisfied that change in the policy was necessary in the
F public interest it would be entitled to revise the policy and lay
down a new policy.
45. In Prag Ice & Oil Mills vs. Union of India AIR 1978
SC 1296 the Supreme Court observed :
G "We do not think that it is the function of the Court to
sit in judgment over such matters of economic policy as
must necessarily be left to the government of the day to
decide. Many of them are matters of prediction of ultimate
results on which even experts can seriously err and
H
BAJAJ HINDUSTAN LTD. v. SIR SHAD! LAL 183
ENTERPRISES LTD.
doubtlessly differ. Courts can certainly not be expected to A
decide them without even the aid of experts."
46. In Shri Sitaram Sugar Co. Ltd. vs. Union of India
(1990) 3 SCC 223 the Supreme Court observed :
·"Judicial review is not concerned with matters of B
economic policy. The Court does not substitute its
judgment for that of the legislature or its agents as to
matters within the province of either. The Court does not
supplant the view of experts by its own views."
c
It must be remembered that certain matters are by their nature
such as best be left to experts in the field. This Court does not
have the technical and administrative expertise in this respect.
47. In the words of Chief Justice Neely :
D
"I have very few illusions about my own limitations as
a Judge. I am not an accountant, electrical engineer,
financer, banker, stockbroker or system management
analyst. It is the height of folly to expect Judges intelligently
to review 5000 page record addressing the intricacies of E
a public utility operation. It is not the function of a Judge to
act as a super board, or with the zeal of a pedantic school
master substituting its judgment for that of the
administrator."
F
48. In our opinion there should be judicial restraint in fiscal
and economic regulatory measures. The State should not be
hampered by the Court in such measures unless they are clearly
illegal or unconstitutional. All administrative decisions in the
economic and social spheres are essentially ad hoc and G
experimental. Since economic matters are extremely
complicated this inevitably entails special treatment for distinct
social phenomena. The State must therefore be left with wide
latitude in devising ways and means of imposing fiscal
re~ulatory measures, and the Court should not, unless
H
184 SUPREME COURT REPORTS [2010] 15 (ADDL.) S.C.R.
A compelled by the statute or by the Constitution, encroach into
this field.
49. In our opinion, it will make no difference whether the
policy has been framed by the legislature or the executive and
in either case there should be judicial restraint. The Court can
8
invalidate an executive policy only when it is clearly violative of
some provisions of the Statute or Constitution or is shockingly
arbitrary but not otherwise.
50. As held by this Court in Divisional Manager, Aravali
C Golf Club & Anr. vs. Chander Hass & Anr. JT (2008) 3 SC
221, the Court must maintain judicial restraint and not ordinarily
encroach in the domain of executive or legislature.
51. In our opinion the impugned Press Note and
0 Notification were validly issued under Section 298 of the Act.
Hence the impugned judgment cannot be sustained and it is
hereby set aside.
52. The appeal is allowed. No costs.
E Civil Appeal Nos. 585712005 & 585812005
53. In view of our order passed in Civil Appeal No.5856
of 2005, these appeals stand disposed of. No costs.
D.G. Appeal allowed.
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