K. Lahiri, J.
1. The object and purpose of the Rice-Milling Industry (Regulation) Act, 1958, for short 'the Act,' and the Rice-Milling Industry (Regulation and Licensing) Rules. 1959, as amended, 'the Rules' for short, the power and jurisdiction of the authority to refuse extension of permit granted under Section 5(3) of 'the Act' in exercise of its power under Section 5 (6) of 'the Act' are the subject matters for our consideration in this writ application. We are also to consider the scope of the conditions prescribed under Sub-sections (3) and (4) of Section 5 of 'the Act' read with Rule 3 of 'the Rules' for granting permits in respect of new rice mills.
2. The petitioner had been granted a permit under Section 5 (3) of 'the Act' for establishment of a new Rice Mill at Nij Mikirgaon, sub-division Marigaon. District Nowgong, Assam, after due consideration of the relevant conditions set-forth in Section 5 (3) and (4) of 'the Act' read with Rule 3 of 'the Rules'. The petitioner could not establish the Mill within the prescribed period of six months as he did not receive the ordered machinery from the firm. He applied for extension of the period but the Government turned down the prayer but informed him that they would consider the possibility of issuing 'a new permit' provided the petitioner selected an alternative suitable site about 1 Kilometer away from the existing site, as the neighbouring millers objected to the installation of the mill. Being aggrieved by the order of refusal as well the order directing him to select a new site when the petitioner had already constructed the building, purchased plant and machinery required for running the mill, has filed this writ application under Article 226 of the Constitution questioning the validity of the impugned orders.
3. The relevant facts necessary for disposal of the questions raised are set out below:--
The petitioner, an unemployed young man applied for the establishment of a modern rice mill at Nil Mikirgaon under Section 5 of the Act. It was for power-driven sheller-huller type of mill. Before granting the permit, the Government caused full and complete investigation to ascertain whether the establishment of the Mill was necessary for ensuring adequate supply of rice, as required under Sub-section (3) of Section 5 of 'the Act.' The Government also made a full and complete investigation and ascertained (a) the number of rice Mills operating in the locality, (b) the availability of paddy in the locality, (c) the availability of power and water supply for the rice mill in respect of which a permit was applied for (d) whether the rice mill in respect of which the permit was applied for would be of the huller type, sheller type or combined sheller-huller type, (e) whether the functioning of the rice mill would cause substantial unemployment in the locality and (f) other particulars. These are necessary considerations for granting a permit under Section 5 (3) of 'the Act.' The investigation also duly noted the requirements of Sub-section (2) of Rule 3 of 'the Rules.' The reports called for by the Government clearly indicate that the mill would be centrally situated, paddy was sufficiently available in the locality, the applicant was financially sound, electricity, labour and water were, readily available, it was a huller-sheller mill. The reports sent to the Govt. clearly showed that there were two rice mills one within a distance of one kilometer and the other just on the opposite side, but it was in another mouza. The report clearly stated that there was no modern Rice and Chira Mill and the proposed modern mill would help the public to build up their economy. The applicant was unemployed educated youth and it was a modern mill with modern machinery. On receipt of the reports, the Government was satisfied that the applicant had fully satisfied the conditions to get a permit under Section 5 of the Act; and, accordingly on 30-3-79 granted him a permit to establish the Rice/Chira Mill within a period of six months. Before the expiry of the period, the petitioner informed that he had already constructed the building required for the mill, had placed orders for the plant and machinery and spent Rs. 31,900/- did everything necessary for the electrification and asked for 3 months time to fully establish the mill. A report was called from the sub-divisional Officer, who in turn asked the Extra-Assistant Commissioner, Marigaon, to submit his report and the latter reported that there were two rice mills who had objections for installing the mill at the site but the petitioner had already constructed a building, invested Rs. 25,000/-, had received a bill amounting to Rs. 31,000/- being cost of the machinery awaiting delivery and the proposed mill was a Geared Type 'D' husker which provided more capacity of turn out of rice. It was also stated that on the strength of the permit the petitioner had already constructed the building, incurred huge expenditure and withholding of the permit would cause heavy loss to the petitioner. The Sub-divisional Officer enclosed the report of the local Extra-Assistant Commissioner and reiterated that 'It is a good paddy growing locality,' there were two mills near the proposed site which had been pointed out by them to the Government before granting the permit, the petitioner had expended money, proposed to establish a modern mill and recommended for the extension applied for. However, by the letter dated 23-2-1979 the State Government informed the petitioner that the extension of his permit could be considered provided he shifted the site of his rice mill to a new site which should be free from objection from any other miller. The petitioner expressed his difficulties because he had already constructed the building on his own land and invested money therefor. A report was called from the Sub-Divisional Officer which established that the land was that of the petitioner's father and his three brothers; a new building was constructed to accommodate the proposed mill machinery were found stored in the godown. However, it was stated that local public particularly those connected with the two nearby mills objected to the establishment of a modern rice mill by the petitioner 'on the ground of affecting the economy of the said mills.' By the impugned order dated 6th June, 1981, the Government informed the petitioner that as he had failed to instal the mill within the stipulated period the prayer for extension of the permit was rejected, however, they were ready to consider for issuing a new permit at an alternative suitable site. The petitioner made representation, reiterating his difficulties and claimed that he had already spent Rs. 60,000/- in constructing the building, purchasing the machinery and installing them. However, the Govt. turned down his prayer by the impugned order dated 6-8-1981. The respondents contend that the permit for the establishment of the mill was granted within a stipulated period of six months, which had expired, and they had no power to extend the period in view of the objections raised by the millers and others to instal the mill. The Respondents further state that the petitioner could not be granted renewal of the permit because there were two existing rice mills and the original report of the Sub-divisional Officer dated 16-2-1979 was silent about the existence of those mills; the Government had granted the permit without any knowledge about the existence of the mills. However, the averment is factually incorrect as the Sub-divisional Officer enclosed the report of the Sub-Inspector of Supply to the Government which clearly indicated that there were two existing rice mills within a distance of 1 K. M. Even the report of the Sub-Divisional Officer indicated that there was one rice mill within a distance of 1 K. M. on the east and another mill just on the opposite side of the proposed mill. The sole ground for the rejection of the prayer for renewal and asking the petitioner to shift the site of the mill to a place where there existed no rice mill was that the economy of the existing mills would be adversely affected and the millers and a section of people had objection to the establishment of the new mill.
4. The first contention of the petitioners is that once the Govt. had granted a permit under Section 5 of the Act, after making a full and complete investigation necessary for granting a ''permit' enjoined by Section 5 (4) of 'the Act' read with Rule 3 (2) of 'the Rules.' the prayer for renewal could not be rejected on the alleged objection of a few rice millers. The permit was subject to renewal, as provided in Section 5 (6) of 'the Act' and Rule 5 (3) of 'the Rules' and, the Govt. could have refused to extend the period on just, reasonable and appropriate ground. In the instant case when the inability to instal the plant and machinery of the mill was beyond the control of the petitioner, the Respondents were bound to renew it in view of the provisions contained in 'the Act' and 'the Rules' framed thereunder. Mr. N. M. Lahiri, learned Advocate General, Meghalaya, for the petitioner submits that once the Govt. grant a permit under Section 5 (3) of the Act on due fulfilment of the conditions set forth in Section 5 (4) of 'the Act' and the provisions of Rule 3 (2) it had no jurisdiction to reconsider the factors necessary for granting a permit at the time of renewal. In any view of the matter; refusal to extend the period was illegal, unreasonable and arbitrary. The second limb of attack is that a permit cannot be refused on the objections of the mill owners of the nearby area as the relevant considerations for renewal and/or grant are prescribed in Section 5 (3) and 5 (4) of 'the Act' and Rule 3 (2) of 'the Rules,' Mr. Lahiri invited attention to Rule 3 (1) (a) in support of his contention that the ground for refusal to renew on the objection of the Millers was an irrelevant consideration and as such the impugned order is liable to be set aside and the Govt. should be directed to renew the permit for at least 3 months.
5. Mr. D. N. Choudhury, learned Senior Government Advocate. Assam, has strenuously contended that the Government has absolute discretion to refuse renewal, they have validly exercised their power under Section 5 (6) of 'the Act.' The considerations on which the permit was not renewed were all relevant considerations.
6. To appreciate the contentions of the parties, it is necessary to state that 'the Act' was brought in the statute book to regulate the Rice Milling Industry in the interest of the general public. The statutory declaration in Section 2 of 'the Act' reads :--
'It is hereby declared that it is expedient in the public interest that the Union should take under its control the rice milling industry.'
The public interest is the supreme consideration in taking over the control of the Rice-Milling Industry. For establishment of a rice mill one must make application in Form I of 'the Rules.' We extract Sub-rules (1) and (1A) of Rule 3 of 'the Rules' :--
'3. Permits--(1) Every application for a permit shall be in Form I.
(1A). In the case of a new rice mill, the application referred to in Sub-rule (V) shall be made before taking any of the following steps namely.
(a) raising from the public any part of the capital required for the rice mills
(b) acquiring land for setting up the rice mill;
(c) commencing the construction of any part the building wherein the rice mill is intended to be installed;
(d) placing order for the whole or any part of the plant and machinery required for the rice mill.
2. to 3. xx xx xx xx
7. The Rule clearly states that no steps should be taken for acquiring land for setting up of the rice mill, commencing the construction of the building for the rice mill or placing orders for the whole or any part of the plant or machinery required for the rice-mill. The reason is obvious, as a person having land or building or plant and machinery may or may not get a permit nor can a person lay any claim for permit merely on the score that he has land or building or placed order for the plant and machinery. However those are very relevant considerations if after a permit is granted the granted purchases land. constructs building places orders for the plant and machinery required for the mill. On receipt of an application; the Govt. must consider whether it is necessary to grant permit 'for ensuring adequate supply of rice'. The prime object is to ensure adequate supply of rice to the public. However, this is also subject to the conditions set forth in Sub-sections (4) and (5) of Section 5 of 'the Act'. Section 5 (5) deals with the question of giving preference amongst the applications for permits with which we are not concerned in the instant case. Therefore, we extract the provisions of Section 5 (4) of 'the Act' :
'5. Grant of permits in respect of new or defunct rice mills.'
(1) to (3) xx xx xx xx
(4) Before granting any permit under Sub-section (3), the Central Government shall cause a full and complete investigation to be made in the prescribed manner in respect of the application and shall have due regard to--
(a) the number of rice mills operating in the locality;
(b) the availability of paddy in the locality:
(c) the availability of power and water supply for the rice mill in respect of which a permit is applied for.
(d) whether the rice mill in respect
of which a permit is applied for will be
of the huller type sheller type or combined sheller huller type:
(e) whether the functioning of the rice mill in respect of which a. permit is applied for would cause substantial unemployment in the locality.
(f) such other particulars as may be prescribed'.
8. It will be seen that the relevant considerations are the number of rice mills operating in the area, the availability of the paddy, the availability of water and power supply, the type of the proposed mill and whether the functioning of the rice mill would cause substantial unemployment in 'the locality. The investigation referred in Section 5 (4) of the Act' requires ascertainment of facts whether the grant of the permit is 'necessary for ensuring adequate supply of rice'. The necessary factors for investigation have been set forth in Rule 3 (2) of 'the Rules', which we quote hereinbelow:
'3. (2) The investigation referred to in Sub-section (4) of Section 5 of the Act shall be made with a view to ascertaining whether the grant of the permit is necessary for ensuring an adequate supply of rice and shall in addition to the matters specified in Clauses (a) to (e) of that sub-section, relate to the ascertainment of information regarding,--
(a) the effect that the operation of the new or the defunct rice mill may, have on the local economy.
(b) the pattern of trade and commerce in rice in the locality; (c) the reasons for the stoppage of operation in the case of a defunct rice mill:
(d) the necessity or otherwise for an addition to the productive capacity of the existing rice mills in the locality:
(e) whether hand-pounding industry in the locality is already well organised and whether the establishment of a new rice mill is likely to affect adversely the industry; and,
(f) the scope for development of the hand pounding industry in the locality'.
9. A glance at Sub-rule 3 (2) of 'the Rules' explains that the required investigation under Section 5 (4) must be made with the view to ascertaining whether the grant of the permit is necessary for ensuring adequate simply of rice. The investigation is projected to elicit information regarding (1) the effect of operation of the new rice mill might have on the local economy: (2) the pattern of trade and commerce in rice in the locality. (3) the reasons for the stoppage of operation of defunct rice mill, if any; (4) the necessity or otherwise for an addition to the productive capacity of the existing rice mills in the locality; (5) whether hand-pounding industry in the locality is already well organised and whether the establishment of a new rice mill is likely to affect adversely that industry.
10. The scheme of 'the Act' inter alia, depict that the regulatory Act has threefold purpose. First, to encourage the hand pounding industry Secondly, to provide employment for rural population. Thirdly, to see that the requisite facilities for conversion of paddy into rice are encouraged. It is evident from 'the Act' that the existing power driven mill owners are even not required to be served with notice or heard before granting a. permit. While 'the Act' Ss regulatory inasmuch as it controls the establishment and running of rice mills, the Act also prevents mushroom growth of new rice mills, unless warranted by necessity to ensure adequate supply of rice. The investigations under Section 5 (4) read with Rule 3 (2) are to achieve twofold purpose. First to ascertain whether the grant of permit would ensure adequate supply of rice. and. secondly to gather facts regarding the considerations set forth in Section 5 (4) and Rule 3 (2). A new mill may be allowed to operate in the area provided there is availability of power and water supply, availability of paddy in the locality; the number of rice mills including hand-pounding mills in the locality, the type and nature of the new mill, that is whether it is huller type or shelter type or combined sheller huller type, whether it would help the local economy. The object of the investigation is not to protect the monopolists in rice-milling industry in any locality. The existing mill owners have no right of representation. There may be large paddy growing area without adequate power supply. In that event a new permit should not be granted. Similarly if the proposed mill is not equipped with modern tools and machinery which can adequately and cheaply convert paddy into rice, in public interest, permit should not be granted. It has been urged by learned Senior Govt. Advocate that the installation of a modern mill would cause substantial unemployment in both the mills. We consider it to be not a relevant consideration as Section 5 (4) denotes whether the functioning of the new mill would cause substantial unemployment in the locality. By establishing a new mill some hands would be necessary, it would remove some unemployment. If a few hands in the neighbouring mills are unemployed it does not mean 'substantial unemployment in the locality'. What is contemplated in Clause (e) of Sub-section (4) of Section 5 is substantial unemployment in the locality due to the grant of the permit. It refers to unemployment in hand-pounding industry in the locality where ordinarily a large number of local persons are employed. In the instant case there is no material that there would be 'substantial unemployment in the locality'. There is no wrangle that sufficient paddy is available for the existing mills as well as the new mill. The contention that a new mill may bring down the income of the existing rice mill or would render them unremunerative cannot be a ground for refusal of a permit. The purpose of 'the Act' and Section 5 is not to protect monopolisers in rice-milling industry in any locality by prohibiting competition rendering them remunerative. Rule 3 (2) (a) speaks about the effects that a new mill might have 'on the local economy,'' not the economy of the existing rice mills, but the economy in general having regard to the pattern of trade and commerce in rice in the locality. Therefore, if paddy is available to feed the existing mills as well as the new mill, there cannot be any impediment to grant a permit under Section 5. The cardinal elements necessary for consideration are whether a new mill would ensure adequate supply of rice and that it might not affect the hand-pounding industry in the locality. It has been conceded by the State that in the instant case adequate supply of paddy is avail able and that no hand-pounding industry would be affected. In our opinion, a modern rice-mill creates employment rather than unemployment. We are further of the opinion that the term 'unemployment' should be read in the context of the hand-pounding industry of the locality and not with reference the rice mill industry. In the instant case, the question of unemployment in the hand-pounding industry is conspicuously absent. The apprehension that there might be retrenchment in the existing mills is merely an apprehension. Assuming it to be so, the Govt. is to see to the interest of the public and not to protect the monopolist millers with outdated machines producing inadequate supply of rice at a comparatively higher rate.
11. For the foregoing reasons we hold that the purpose of 'the Act' is not to protect monopolists in the rice-milling industry in any locality by preventing competition. The object of the Act is to protect hand-pounding industry where local hands are employed. Therefore, if after giving due regard to the fact that sufficient paddy is available in a locality for the existing mills as well as the proposed mill, a new permit must be granted provided the applicant fulfills the other conditions as well. We are of the opinion that the term 'locality' cannot be equated to one mile radius or any other area but it should be so construed as to include the area which is sought to be served by the proposed rice mill. Under these circumstances, the fundamental consideration for rejecting the prayer for renewal on the grounds that there were objections of the neighbouring mills and their camp followers that they would be economically hard hit were absolutely irrelevant considerations not germane to the provisions of the Act.
12. When the relevant considerations have been expressly stated in 'the Act' and 'the Rules' the State Government instead of considering those relevant factors have taken 'extraneous considerations'. An authority exercising power or discretion must have regard to the relevant considerations set forth in the Statute. The authority had no arbitrary and unbridled power to refuse to grant or renew the permit. It is bound by the rule of law and must act in accordance with the provisions of 'the Act' and 'the Rules' framed thereunder. We have alluded that the Govt. have taken into account matters which they should have disregarded and should not have taken into consideration. In refusing to renew the permit and asking the petitioner to shift his mill to a different area the authority has contravened the law by acting in excess of its power. These are the grounds on which the impugned, order of refusal to renew the permit must be quashed.
13. Be that as it may. Let us consider the next substantial contention of the petitioner. It has been urged that the permit for the establishment of the new mill was admittedly granted after making full and comprehensive investigation required under Section 5 (4) of 'the Act' read with Rule 3 (2) of 'the Rules'. The petitioner applied for extend on the ground that he made all endeavours to complete the establishment of the mill, constructed the building for the mill, made necessary electrification for the same but ordered tools and machinery did not reach in time so he required another 3 months' time of fully establish the mill. It will be seen that Rule 3 (1A) introduced by G. S. R. 1028 dated 29-8-1960 states that application for grant of a permit must be made before acquiring any land, commencing any construction, placing orders for the plant and machinery etcetera. However, after an applicant obtains a permit to establish a mill he must acquire land, commence construction, place orders for plant and machinery. The period for establishment of a new rice mill is only 6 months as provided in Rule 3 (5) of 'the Rules''. However, the very sub-rule provides that the period of 6 months runs from the date of grant of the permit 'or within such further period as the authority granting the permit, may allow.' It is therefore, seen that generally the period of 6 months is the rule, however, the authority may extend the period. Section 5 (6) of 'the Act' also provides that a permit granted under Section 5 (4) shall be valid for the period specified therein or for such extended period as the Government may think fit to allow. Therefore, the period is extendable on just and reasonable grounds. The contention of the respondents that the periods is not extendable, therefore, cannot be accepted. Admittedly, in the instant case, the petitioner did everything possible to establish the mill, constructed building, made it ready for establishment, ordered for the goods and asked for three months' extension. The ground for extension was due to his inability to get the delivery of plant and machinery, which was not found to be incorrect or unreasonable ground for extension. However the authority passed a barren order of refusal. The Government by-passed it by stating that it could not renew the permit, that much and no further and made a counter-offer to grant a new permit if the petitioner shifted the situs of the mill. It was a shocking order when the petitioner after the grant of the permit constructed the building on his land, ordered and obtained the tools and machinery etcetera. To deprive him of his right to get an extension, a reasoned order was necessary. In absence whereof the impugned order of refutal must be held to he arbitrary. However, the grounds of refusal were the so-called considerations enumerated in Section 5 (4) of 'the Act' and Rule 3 (2) of 'the Rules' which are relevant before the grant and, irrelevant consideration for refusal to renew a permit under Section 5 (6) of 'the Act'. Learned Sr. Government Advocate has failed to point out that there is any provision which empowers the authority to re-investigate the case under Section 5 (4) of 'the Act' and Rule 3 (2) of 'the Rules' at the time of extension of the period under Section 5 (6) read with Rule 5 (5). Once an investigation had been completed and a permit was granted and when there was a thorough investigation, the question of re-investigation of the case did not arise at all. In our opinion, no re-investigation is permissible at the stage of renewal of the permit. At least the provisions of the law do not empower the authority to make such investigation. Mr. D. N. Choudhury, learned Sr. Govt. Advocate points out that in the earlier reports there was no indication about the existing rice mills. However, we find that the averments of the respondents in their affidavit are not borne out from their own documents produced and marked as Annexure-I. In his report, the Sub-divisional Officer, Marigaon, clearly stated that there were two existing rice mills, one at a distance of 1 Kilometer and the other just on the opposite side of the proposed mill. The report of the Sub-Inspector of Supply appended to the report of the Sub-divisional Officer and forwarded to the Government also indicated that there were two pre-existing rice mills dose by. Therefore, the question of re-investigation of the case and reconsideration of grant of permit was beyond the competence, of the authority. There is no provision in 'the Act' that after a permit is granted it could be cancelled, annulled or set aside on any ground whatsoever. The question of cancellation of a permit entails great hardship to the grantee. It is the obligation of the Govt. to have a detailed investigation before granting a permit for the establishment of a new rice-mills. Failure on their part to have investigation cannot be made a handle to cancel the permit. In fact, there is no provision for cancellation of an existing permit. We are of the opinion that at the stage of renewal of the permit, the authority has no jurisdiction to re-investigate the case under Section 5 (4) read with Rule 3 (2). The considerations prescribed under Section 5 (4) and Rule 3 (2) only apply at the time of grant of the permit, which have no application while considering the question of renewal of the permit under Section 5 (6) read with Rule 3 (5) of 'the Rules'. In The Nagar Rice & Flour Mills v. N. Teekappa Gowda, AIR 1971 SC 246 a question arose as to whether the considerations prescribed in Rule 5 (4) applied when the miller desired to shift the location of an existing rice mill. Their Lordships held that the considerations do not apply in such cases. In our opinion, the considerations set forth in Section 5 (4) and Rules 3 (2) are inapplicable in the case of renewal of a permit.
14. For the foregoing reasons we
hold that the impugned order of refusal
to renew the permit of the petitioner
as well as the impugned order offering
a fresh permit, provided he installed the
mill at & distance of 1 Kilometer away
are void, illegal and inoperative. Accordingly, the impugned orders are
quashed. We further do issue mandamus directing Respondent No. I to re
new the permit of the petitioner to such
further period as it may allow. How
ever, it should not be less than 3 months,
in view of the provisions of Rule 3 (5) (b)
of 'the Rules' and not more than six
15. In the result the petition is allowed with cost of Rs. 200/-.
S.M. Ali, J.
16. I agree.