Elappully Brewery Case: Kerala High Court Quashes Govt Order Granting Preliminary Sanction To Private Company To Set Up Ethanol Plant

The Kerala High Court on Friday (December 19) quashed the government order that gave preliminary sanction to M/s Oasis Commercial Pvt. Ltd. to set up a brewery plant in Palakkad's Elappully grama panchayat.

The Division Bench of Justice Satish Ninan and Justice P. Krishna Kumar today allowed a batch of public interest litigations filed by the residents of Elappully.

The Bench found that the factors considered by the Government while according preliminary sanction was not factually correct. It thus observed:

"The Government Order...granting preliminary sanction to the Company, for establishment of Ethanol Unit will stand quashed. However, this will not preclude a fresh consideration of any application, by the Government, if made, on the basis of the necessary inputs."

Oasis had submitted an application dated 30.11.2023 to the Commissioner of Excise, seeking permission to install a 500 KL capacity ethanol-cum-multi-feed distillation and IMFL bottling unit, brewery, malt plant, winery and grape spirit plant.

On 06.02.2024, the Excise Commissioner gave his recommendation and forwarded the application to the government for initial sanction. The recommendation was supported by the reports of Deputy Excise Commissioner, Palakkad and that of the Joint Excise Commissioner, Central Zone. Considering the same, the government had granted the preliminary sanction.

The petitioners argued that the government sanction was granted under a factually incorrect input that the unit was going to be established in Kanjikode industrial area whereas it is actually being set up in Elappully, approximately 5 km from Kanjikode.

It was also pointed out that the Kerala Water Authority (KWA), on the very same day on which the company submitted its application, agreed to spare water without considering the fact that the 5000 KL would be required by the plant per day, putting the putting life of the inhabitants at peril.

The petitioners further contended that the Government also took into consideration, Oasis's representation that it has been shortlisted by the Oil Marketing Companies under the National Policy on Bio-fuels, regarding usage of ethanol blended petrol. The agreement produced showed that the entire quantity of ethanol manufactured in the unit were to be supplied to the oil marketing companies.

Oasis, on the other hand, denied all this.

Also, it was argued by the petitioners that the company did not obtain statutory licences from the panchayat and that the Government sanction is in broad terms, foreclosing the statutory rights and obligations of the statutory authorities. However, the Court did not agree with this view. It observed:

"It can only be held that the sanction granted is, the previous approval as contemplated under Section 14 of the Abkari Act...Unless the prior approval of the Government in terms of Section 14 is obtained, there is no point in the Company seeking for sanction from the other authorities for going ahead with the project. So also, the Government Order does not indicate that the duties and powers of the various statutory authorities in connection with the establishment of the Unit have been interfered with. The mere fact that the Cabinet had taken the decision does not warrant a conclusion otherwise. Even that apart, such rights could not be foreclosed through a Government Order. Therefore, such apprehension is misconceived."

Next, looking at the same day approval given by the KWA, the Court noted that while the water authority filed a counter stating that the consent to supply water was only to enable the company to participate in the tender floated by the oil companies, the government sanction was issued based on the KWA's consent.

The Court further observed:

"It is not evident as to what audit was done by the Kerala Water Authority before issuing such consent. Though the learned counsel for the Company would submit that letter by the Kerala Water Authority was only to enable the Company to take part in the process of selection under the Central Government Scheme, it is hardly an explanation. As noticed by us above, the Government Order under challenge has specifically reckoned the consent given by the Kerala Water Authority also."

Though the company argued that it would procure water from other sources without exhausting the ground water, the Court felt that these factual aspects cannot be considered in the present proceedings.

"We only notice that the Government Order, while granting the preliminary sanction, had within its zone of consideration the consent given by the Kerala Water Authority and had reckoned the same," the Court added.

The Court noted that the government sanction was provided under the Abkari Act and also taking into consideration the liquor policy for the year 2023-24 whereas the agreement entered into between the company and the various Petroleum Corporations showed that the entire ethanol manufactured would be supplied to them.

Considering these, the Court remarked:

"On the above discussions we find that, various factors which weighed with the Government while issuing Government Order, are not factually correct in its entirety. Therefore, the Government Order issued based on such facts is liable to be quashed."

Thus, the Court allowed the PILs and quashed the government order but making it clear that the government is not precluded from making a fresh consideration on sanction.

Case Nos: WP (PIL) No. 54 of 2025 and connected cases

Case Titles: Assembly Of Christian Trust Servies v. State of Kerala and Ors. and connected cases

Citation: 2025 LiveLaw (Ker) 837

Counsel for the petitioners: M.R. Hariraj (Sr.), Thomas Jacob, P.S. Biju, K.P. Prasanth, Sunitha K.G., V. Praveen, Sonu Augustine, Alina Anna Kose, Thanuja Roshan,

Counsel for the respondents: Justine Jacob, M. Krishnakumar, Rajesh Sivaramankutty, S. Kannan - Senior G.P., Arul Muralidharan, Sonu Augustine, K. Gopalakrishna Kurup - Advocate General, N. Manoj Kumar - State Attorney

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