INDIA BUSINESS WORLD SEPTEMBER (16^th - 30^th) 2007
The Month that was ...

STATE CAN'T FORCE SUGAR MILLS TO SUPPLY MOLASSES SC

THE Supreme Court has ruled that the government cannot force sugar mills to supply the molasses if they do not have excess stocks. The apex court ruled that an order issued by the Uttar Pradesh government demanding molasses supply from sugar mills irrespective of their stocks is illegal.

Earlier, the Allahabad High Court had ruled that all sugar mills were bound to supply 20% molasses to the authorities under the government order, irrespective of the stock they possessed. The ruling was contested by Dharmpur Sugar Mills in SC.

An SC bench comprising justices CK Thakker and Altamas Kabir said: "The high court, in our opinion, was not right in holding that all sugar mills were bound to supply 20% molasses to the authorities under clause (3) of the government order dated June 9, 2004 irrespective of stock possessed. In our opinion, however, clause (3) applies only to excess stock of molasses, that is, molasses which is in excess of and not used for captive consumption by sugar factory and is thus balance stock."

The court further directed the UP government to constitute a molasses advisory committee for the purpose of control of storage, preservation, gradation, price, supply and disposal of molasses, under UP Molasses Advisory Committee Rules of 1965.

"In our considered opinion, it is not open to the state government to ignore this salutary provision taking specious plea that the provision relating to constitution of committee is enabling, directory or discretionary and state, therefore, is not obliged to constitute such committee," said justice Thakker writing the verdict.

Dharmpur Sugar Mills had a distillery that manufactures ethyl alcohol, used for blending of petrol, manufacture of chemicals and rectified spirit for medicines. It also had similar business at Asmouli, in Moradabad, Mansurpur in Muzaffarnagar, and Rozagaon, Barabanki district. The company had challenged government's order directing it to supply 20% of the molasses produced by the sugar mills for manufacturing country-made liquor by the distilleries.

The government had served a notice on the company, asking why it should not be prosecuted for committing offences punishable under Uttar Pradesh Sheera Niyantran Adhiniyam, 1964 Act as the mill failed to comply with the orders issued by the authorities and did not supply 20% molasses for manufacturing country-made liquor.

The company had said that its entire molasses production was required for its captive consumption. It argued that since it did not have balance or extra stock of molasses for being supplied to distilleries for manufacturing country-made liquor, the authorities could not compel it to supply molasses. Such action was improper, illegal, arbitrary and unreasonable, inconsistent with the provisions of the Act as also violative of Articles 14 and 19(1)(g) of the Constitution, the company had said.