An Entrepreneur Who Has Invested Crores and Obtained All Statutory Clearances Cannot Be Denied Permission Merely Because of a Handful of Protesters”: Kerala HC [Read Judgment]

Kerala: The High Court of Kerala at Ernakulam has directed the Nellanad Grama Panchayat to allow the licence application filed by the petitioners for operating a hot mix plant, holding that the Panchayat’s repeated rejection of the application was legally unsustainable and constituted a violation of the directions issued by the Court in an earlier writ petition. The Court set aside the impugned order of the Panchayat Committee and directed that necessary orders be passed within two weeks from the date of receipt of the certified copy of the judgment.

Justice P.V. Kunhikrishnan further held that, in view of the amendment to Section 233 of the Kerala Panchayat Raj Act, 1994 brought about by Act 14 of 2018, the Panchayat no longer has the power to reject an application for establishment of a factory or installation of machinery. It can only grant permission, either absolutely or subject to conditions. The Panchayat’s attempt to bypass this statutory mandate by characterising the application as one governed by the pre-amendment law was found to be factually incorrect and legally impermissible.

Kerala High Court Rules Panchayat Cannot Reject Industrial Licence Post-2018 Amendment to Section 233

The case concerned two petitioners, namely Sudheer S. and Thajudheen A., who are partners in a firm named N&T Tar Hotmix Plant. The first petitioner had originally sought to establish a proprietary hot mix plant of 20 KW in 2017 by filing an application under Section 233 of the Kerala Panchayat Raj Act, 1994 before the Nellanad Grama Panchayat. The Panchayat sought reports from the District Medical Officer and the Kerala State Pollution Control Board. The District Medical Officer raised no objection, and the Pollution Control Board granted consent to operate dated 04.05.2017. However, no intimation was issued by the Panchayat within the mandatory 30-day period, resulting in deemed permission under Section 236 of the Act.

Despite the deemed permission, the Panchayat Committee, by its decision dated 10.05.2017, rejected the application solely on the ground that a public protest had taken place. The petitioner challenged this decision before the Tribunal for Local Self Government Institutions, which stayed the impugned order. In spite of the stay, the Panchayat issued a stop memo on 29.05.2017. The first petitioner had to approach the High Court for police protection for the functioning of his proprietary concern, which was granted by the Court.

Subsequently, by abundant caution, the first petitioner filed a fresh application on 28.01.2018 under Section 233 of the Act. The Tribunal, while dismissing the revision petition, directed the Panchayat not to interfere with the functioning of the unit till the fresh application was disposed of. No orders were passed on this application either, resulting in another deemed sanction under Section 236. The first petitioner thus continued operations as a proprietary concern.

Court Slams Licence Rejection Based on Public Protest, Upholds Entrepreneur’s Statutory Rights

In 2022, the two petitioners formed the partnership firm and acquired an ultra-modern batch mix hot mix plant worth over Rs. 5 crore, purchasing it vide invoice dated 25.03.2022. The partnership was registered on 04.06.2022. A rent agreement for 8.3 acres of land was executed on 20.04.2022. A fresh application under Section 233 of the Act was submitted on 21.06.2022. The Panchayat was required to take a decision by 20.07.2022. As no intimation was received within the prescribed period, deemed permission arose under Section 236(3) of the Act. However, the Panchayat issued yet another stop memo on 24.01.2023. The petitioners challenged this before the Tribunal, which stayed the stop memo, and the stay continued to be in force. The Pollution Control Board also granted fresh consent to operate dated 13.03.2023.

Despite these developments, obstruction continued. The petitioners filed multiple writ petitions seeking police protection, including WP(C) No. 15965/2024 (disposed of vide order dated 16.04.2024 directing police to maintain law and order) and WP(C) No. 23320/2024 (which was not entertained, as the Court held that the MSME acknowledgement certificate was applicable only to new units and not to those already in operation).

In May 2025, the petitioners filed yet another application, which was rejected by the Panchayat Committee on the ground that local residents apprehended serious health problems. This rejection was challenged in WP(C) No. 21247/2025. The High Court, vide its judgment (Ext.P1), set aside the rejection and directed the Panchayat to reconsider the application afresh within 60 days, in accordance with the procedure under Section 233 of the Act and the amended law, observing that the Panchayat could only grant permission absolutely or conditionally and could not reject the application.

Pursuant to the Ext.P1 judgment, the Panchayat reconsidered the application. However, it once again rejected it (Ext.P3) on two grounds: first, that the amendment under Act 14 of 2018 was inapplicable because the machinery had been installed prior to 2018; and second, that the petitioners had installed machinery of 130 HP capacity without the Panchayat’s permission. Aggrieved by this fresh rejection, the petitioners filed the present writ petition.

The Court rejected both grounds adopted in Ext.P3. On the first ground, the Court noted that the application under consideration was filed on 17.05.2025, well after Act 14 of 2018 came into force. The law applicable had to be the law in force on the date of the application, not the date of installation of machinery. The Court also pointed out that the partnership firm itself was registered only on 04.06.2022, and the machinery in question was purchased on 25.03.2022, making it factually impossible for the 130 HP machinery to have been installed in 2017. The assertion in Ext.P3 that machinery was installed in 2017 by the petitioners was held to be factually erroneous and an apparent attempt to find a reason to reject the application.

The Court further held that the Ext.P3 order, by treating the application as one covered by the pre-amendment law, constituted a clear violation of the directions in the Ext.P1 judgment. The Ext.P1 judgment had expressly directed reconsideration of the application filed on 17.05.2025 in light of the amended Section 233, and the Panchayat could not circumvent this direction by relying on an incorrect factual premise.

On the health hazard argument raised by the party respondents (who were neighbouring residents), the Court noted that the District Medical Officer, by his report dated 06.02.2025 (Ext.P32), had certified that there was no question of public health hazard, that residential houses were situated at least 150 meters from the plant, that the plant had been constructed using modern technology, that all pollution control norms had been complied with, that no water or air pollution risk was found, and that the smoke emitted during operation was within permissible limits. The Pollution Control Board had also granted consent. The Court held that the apprehensions of the party respondents, being unsupported by any scientific or statutory finding, could not override the statutory clearances obtained by the petitioners.

Addressing the contention that Ext.P1 was only an open remand and gave no direction to grant a licence, the Court held that this argument was untenable since it had already found that the reasoning in Ext.P3 was legally unsustainable. Even if Ext.P1 were treated as an open remand, the Panchayat’s fresh decision could not survive independent scrutiny.

The Court also rejected the argument that the alternative statutory remedy before the Tribunal was adequate, reiterating what had been held in the Ext.P1 judgment itself: that this was a fit case for the exercise of discretionary jurisdiction under Article 226 of the Constitution, given the persistent failure to apply the law correctly and the consequent deprivation of a genuine entrepreneur’s rights.

On the question of alleged illegal constructions, the Court noted that the Panchayat’s stop memo for alleged unauthorised buildings had been stayed by the Tribunal and that the stay continued to operate. It held that the pendency of a dispute over constructions was not a ground to reject an application for permission under Section 233, and any illegality in construction could be addressed through separate proceedings.

Examining the broader picture, the Court observed that the petitioners had, after securing clearances from every competent statutory authority except the Panchayat, invested several crores of rupees in establishing an industrial unit. The unit, though fully equipped with state-of-the-art machinery, had been unable to commence operations due to sustained extra-legal pressure. The Court held that when statutory approvals are rendered meaningless by extra-legal resistance, the credibility of the legal framework itself comes under strain. Public dissent, though a protected facet of a constitutional democracy, cannot, in the absence of any proven illegality, prevent an enterprise that has complied with every statutory requirement from commencing operations.

The Court made pointed remarks on the political climate surrounding such cases. It noted that elected representatives are sometimes afraid to support industries in their constituencies for fear of losing their vote bank and called upon political parties and candidates in the then-upcoming General Election to seek a mandate by assuring the electorate that no entrepreneur who has obtained all statutory clearances would be forced to close down due to unsubstantiated public protests. The Court emphasised that industrial growth is the need of the hour and that isolated incidents of this nature would deter investors from the state.

The writ petition was accordingly allowed. The Ext.P3 order of the Panchayat was set aside, and Respondents 4 and 5 were directed to allow the Ext.P26 application, imposing conditions if necessary in tune with Section 233 of the Kerala Panchayat Raj Act, 1994. The directions were to be carried out within two weeks from the date of receipt of a certified copy of the judgment.

The case is titled: Sudheer S. & Anr. v. State of Kerala & Ors.

[Read Judgment]