STATE OF MAHARASHTRA AND ANR.versusPOOJA BREW-CHEM INDUSTRIES P. LTD. AND ANR.

           STATE OF MAHARASHTRA AND ANR.                                            A
                         v.
      POOiA BREW-CHEM INDUSTRIES P. LTD. AND ANR.

                           SEPTEMBER 15, 1995

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

      Bombay Denatured Spilit Rules 1959 :

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

      Constitution of India 1950 :                                                  D
       Article 226--Company's application for grant of licence under r.26 of
Bombay Denatured Spirit Rules, 1959-State authorities examining
desirability of granting licence-Meanwhile company filed writ petition before
High Court which directed State to issue licence-Held, appropriate authority        E
is entitled to examine desirability to grant licence, and on considering relevant
materials supplied by company justifying its claim, it is open to the authority
to refuse or to grant licence for reasons to be recorded-Since this exercise
had not been peifomted High Court was not justified in directing the State to
issue licence.
                                                                                    F
      The respondent company applied to the Commissioner, Prohibition
and Excise for grant of permit tQ manufacture Ethyle Acetate. Later, the
Company intended to manufacture Diethyle Oxalate and Diethyl
Phthalage. The State on 4.4.1991 assured the respondent company of
supply of alcohol quota of 14.40 lakh bulk litres, for one year, provided
that if the company did not start manufacturing the products, assurance · G
for alcohol quota would be cancelled The Company by its letter 1. 4. 1994
intimated the Commissioner that it had completed the project to manufac-
ture the products and was ready to start the production, and requested
him to issue the licence under r.26 of the Bombay Denatured Spirit Rules,
1959. Since licence was not g~anted, the company filed a writ petition H
                                    739
    740                   SUPREME COURT REPORTS [1995] SUPP. 3 S.C.R.

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

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

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

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

G           1.2. The State should issue notice to the respondent- Company on
    grounds on which they propose to take action in case they feel that it is not
    feasible to issue the licence to the respondent-Company, together with the
    material in their custody on the basis of which they formed that opinion. If
    it is felt that certain material is confidential and supply of copies thereof is
    not advisable in the expediency of public administration, the competent
H   authority is at liberty to allow inspection of such material by counsel for
                   STATE v. POOJABREW-CHEMINDS.P.LTD.                       741

    the respondent- company. On receipt of the response and other material in     A
    support of the claim of the Company, the licensing authority would con-

-   sider the case and pass appropriate order. [744-G, 745-B, 744-H]

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

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

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

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

        Dr. A.M. Singhvi, Krishna Agarwal, Bharat Sangal and Ms. Monika
    Kanwar, for the Respondents.                                                  D
            The following Order of the Court was delivered :

            Leave granted.

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

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

            The-prayer in clause (a) read thus :

              "This Hon'ble Court be pleased to issue a writ of mandamus or a G
              writ in the nature of mandamus or any other appropriate writ,
              order or direction under Article 226 of the Constitution of India
              directing the Respondents to forthwith issue to the 1st petitioner
              the requisite D.S.V. licence under Rule 26 of the Bombay Dena-
              tured Spirit Rules, 1959 as also to forthwith release 14.40 lakh bulk H
    742                    SUPREME COURT REPORTS [1995] SUPP. 3 S.C.R.

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

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

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

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

        Thereafter, the company had written a letter on April, 1 1992 to the
  Commissioner intimating that they had completed their project to
G manufacture the products in the factory located at the stated place and
  that they were ready to start the production. They requested in the letter
  to issue the licence required under Rule 26 of the Bombay Denatured
  Spirit Rules, 1959 [for short, '.the Rules'). It appears that the matter was
  considered at different stages. It was asserted by the respondent-Company
H in the writ petition that ultimately the Minister had recommended the grant
              STATE v. POOJABREW-CHEM INDS. P. LTD.                    743

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

       It is contended by Sri Dholakia, learned senior counsel appearing for
the State, that though at one stage the Government had decided to grant
                                                                             B
D.S.V. licence, subsequently it had come to the notice of the Government
that certain sensitive materials were required to be examined. Accordingly,
they examined the matter before taking any decision but in the meantime
the High Court moved under Article 226 of the Constitution, had issued
the directions, as stated earlier. It is contended that on June 21, 1993,     c
decontrol of allocation and supply from the Government sources of the
rectified sprit was made. In consequence, the Government had lost control
over the allotment. Thereafter, an industry was free to approach the
appropriate authority for supply of alcohol for manufacture of any of their
products as a raw material and that, therefore, the direction issued by the D
High Court to supply 14.40 lakh bulk litres of alcohol in terms of the
compromise is clearly unsustainable. It is also contended that so long as
the licence is not issued under Rule 26 of the Rules in D.S.V. Form, the
respondent-Company is not entitled even to start manufacturing thereof.
Therefore, the High Court was clearly in error in issuing the above direc-
tions.                                                                       E

       Shri AM. Singhvi, learned counsel for respondent No. 1, contended
that in view of the various letters referred to hereinbefore, a compromise
was made by the Government for the establishment of the factory. On the
basis of the said compromise, the respondents had established the factory F
at a huge expenditure and that, therefore, the appellants were estopped
from going behind the compromise to grant the licence. He agrees that
after the decontrol of allotment of alcohol, the requirement was that the
licensing authority, viz., the Superintendent, was to specify the quantum
required by the respondent-company to manufacture the specified items.
Unless the specification of the requirement was made, it was difficult for G
the respondent-company to procure alcohol in the open market and keep
the same in store for manufacture of the products. The appellant-
 authorities were not justified in not granting the same.

      Having regard to the respective contentions, the question is whether H
    744                    SUPREME COURT REPORTS [1995] SUPP. 3 S.C.R.

A the order passed by the High Court is sustainable in law. The essential
    question would, therefore, be whether the respondent can have a licence
    under Rule 26. Admittedly, till date no licence is issued. It is ·true, as
    contended by Shri Singhvi, that the required quantum for the manufacture
    of the products is to be specified in the licence, as is evident from similar
                                                                                       -
    licences issued to other companies. But after June 21, 1993, the Govern-
B
    ment has no obligation to make any allotment of alcohol and supply the
    same to any manufacturer since after the decontrol, it is free for all to
    purchase alcohol wherever it is available. But, as stated earlier, issuance of
    the licence under Form D.S.V. being a condition precedent, the respon-
    dent-comp~ny could not start mani:tfacturing the aforesaid two items unless
c   licence was issued to it. The question, therefore, is whether the Govern-
    ment would be justified in not issuing licence. It is submitted that a citizen
    is entitled to set up a factbry and, as required by certain statutory
    provisions, the authorities exercising the power are expected to issue the
    licence subject to the conditions prescribed thereunder. It is stated in
D paragraph 8 of the rejoinder filed in this Court that certain material as
  . regards the desirability to grant the licence to the respondent~company,
    appears to have been covered by the subordinates of the Government. If
    that is so, then necessarily the concerned authority has to put on notice as
    to what material adverse to the appellants is in its possession and it has to
    supply necessary copies thereof and also their prima f acie views on that
E
    material so that the respondent-Company would have an opportunity to
    place all the material to justify its seeking for the licence. Thereafter, it is
    open to the appropriate authority to consider and refuse or grant. the
    licence for the reasons to be mentioned in the order. Since this .exercise
    had not been performed, the High Court was not justified in directing the
F appellants to issue the licence. Accordingly, we set aside the directions
    issued by the High Court. Instead, the state is directed to issue notice to
    the respondent-Company on grounds on which they propose to take action
   in case they feel that it is not feasible to issue the licence to the respon-
    dent-Company together with the material in their custody on the basis of
G which they formed that opinion. This should be done within a period of
    one month from the date of the receipt of this order. On receipt thereof,
    it would be open to t~e respondent-Company to submits its response and
    any other material in supports of its claim. On receipt thereof, the licensing
    authority would consider the case and pass appropriate order and com-
H municate the same within a period of two months therefrom to the respon-
              STATE v. POOJABREW-CHEMINDS. P. LTD.                         745

dent-Company by registered post with acknowledgment due.                          A
       Our setting aside the order of the High Court may not be construed
to mean that exercise of the statutory power of the licensing authority is
fettered in any way.

       Shri Dholakia brought to our notice that some material appears to          B
be confidential and, therefore, it is not advisable in the expediency of public
administration to disclose the same by supplying copies thereof. If that is
so, the competent authority is at liberty to allow inspection of such material
by the counsel for the respondent-Company and on inspection thereof, it
would be open to them to submit their response.
                                                                                  c
       The appeal is accordingly allowed. No costs.

R.P.                                                         Appeal allowed.