ORDER Ravi S. Dhavan, J. - The petitioner Simbhaoli Sugar Mills Ltd. has a Sugar factory situate in district Ghaziabad and is hereinafter referred to as the Sugar Factory. It was established in the year 1933. An intrusion in its 'reserved area' by a Khandsari manufacturer has occasioned the present writ petition. The khandsari manufacturer is respondent No. 3, Messrs Nagar Sugar Works, claiming its unit at village Shakarpur district Ghaziabad. 2. The law assigns a 'reserved area' wherein sugar cane is grown around the hinterland of a sugar factory. This reservation of an area is made upon certain criteria which are prescribed. The khandsari manufacturer operates in this State in pursuance of a licence granted under the U.P. Khandsari Manufacturer's Licensing Order, 1967 (hereinafter referred as to Khandsari Order). It is issued under the Sugarcane (Control) Order, 1966 of the Central Government, which in turn is made in pursuance of the Essential Commodities Act, 1955. 3. The petitioner sugar factory is aggrieved that a khandsari manufacturer, who otherwise could not have been granted a licence under law has been permitted to carry out a manufacturing process in its reserved area, thus, affecting supply of Sugarcane. The mechanics of reserving or assigning an area where sugarcane is grown for a sugar factory casts certain rights upon it ensuring adequate supply of sugarcane. An intrusion in the reserved area of a sugar factory for the purpose of drawing supplies from it origins a lis between the Sugar Factory and the intruder. The sugar factory in such circumstances becomes entitled to voice its grievance before the appropriate authority. While examining the issues in the present writ petition two cases of the Supreme Court cannot escape notice and these are the case in Re : Purtabpur Co. Ltd., AIR 1970 SC 1896 and in Re : M/s. Ganesh Sugar Works, (1987) 4 S CC 604. There is another case of this court in Re : (3) Shankar Sugar Mills Ltd. v. Joint Sugar Commr. U.P., ILR (1) All 663 (sic). 4. The sugar factory contends that the khandsari manufacturer has been illegally granted a licence to carry on a manufacturing process without any reference to the sugar factory and should the khandsari manufacturer aforesaid continue to operate, it affects the reserved area of the sugar factory. U.P., ILR (1) All 663 (sic). 4. The sugar factory contends that the khandsari manufacturer has been illegally granted a licence to carry on a manufacturing process without any reference to the sugar factory and should the khandsari manufacturer aforesaid continue to operate, it affects the reserved area of the sugar factory. It is contended that the licence granted to the khandsari manufacturer cannot be granted either under the law or upon a policy of the State Government. It is further submitted that notwithstanding whether it could be granted or not, the occupier of the sugar factory was entitled to be heard by the State Government. 5. The contention of the sugar factory is resisted vehemently by the Khansari manufacturer on the ground that the reserved area is not the exclusive domain of the sugar factory. 6. Thus, these are the issues in the present writ petition. 7. It is contended on behalf of the sugar factory that it is not in issue that the khandsari manufacturer i.e. respondent No. 3, is not the original licencee of the unit and is a subsequent transferee. This aspect is a matter of record. The original licencee was one Onkar Singh son of Ramjit Singh. Onkar Singh died and his licence was inherited by his two minor children, viz., Yogesh and Nitoo, they held the licence through their guardian one Tilak Ram. The licence was cancelled on 29 November, 1983 as the unit did not manufacture. The permission to restart the unit was granted with a condition that the aforesaid Tilak Ram, the guardian, would run it personally. Should the matters have remained at this stage, probably there would not have been an issue but apparently, Tilak Ram set about to sell the khandsari manufacturing unit to the partners of respondent No. 3, Messrs Nagar Sugar Works, aforesaid. 8. The latter applied for a licence under the Khansari Order. This application was rejected by the Licensing Authority/Deputy Sugar Commissioner, on 29 Nov. 1983, the firm Nagar Sugar Works, respondent No. 3, applied for transfer of the licence with certain modifications. On 13 Feb. 1984 the Khandsari Inspector made a report that the manufacturing unit did not exist at the place where it was meant to be installed. On 15 Feb. 1984 the Deputy Cane Commissioner rejected the application of respondent No. _3 on two grounds. On 13 Feb. 1984 the Khandsari Inspector made a report that the manufacturing unit did not exist at the place where it was meant to be installed. On 15 Feb. 1984 the Deputy Cane Commissioner rejected the application of respondent No. _3 on two grounds. First, that it could not be transferred and secondly, that there was no unit established so as to permit a transfer. The respondent No. 3 filed a representation/appeal against the order of 15 Feb. 1984 before the State Government under the Khandari Order. This res-presentation could be under no other provision except under sub-cl. (5) of Cl. 3 of the Khandsari Order. In this regard sub-cL (4) of Cl. 3 is relevant. It is an order passed under sub-cl. (4) for the grant of renewal of a licence which becomes the subject matter of an appeal under sub-cl. (5). The State Government during the pendency of the appeal of respondent No. 3 again sought a report of the Licensing Authority upon the existence of the Manufacturing unit. The Licensing Authority on 22 March, 1984 reported to the State Government that the power crusher is not in existence. The Licensing Authority again set another report on 19 May, 1984 that the power crusher does not exist. 9. On 29 September, 1984 the Licensing Authority cancelled the licence. This was the licence held by Tilak Ram on the ground that the license was not being utalised for a manufacturing process. Whether the licence could be transferred or not is another issue. It is on record that the licence was cancelled. Against this, no appeal was filed under the Khandsari Order. The order cancelling the licence as held by Tilak Ram became final. 10. On 26 Dec. 1984 the State Government allowed the representation of respondent No. 3 in effect, permitting transfer of the licence. This order of the State Government upon representation of the respondent No. 3 seeking in effect the transfer of the licence from Tilak Ram to them is relevant. This order bears No. 6904 S/18-5- 1800, is dated 26th Dec. 1984 and Annexure 5' to the rejoinder affidavit. This order needs to be examined. The Joint Secretary apparently assuming powers of appeal under sub-cL (5) of Cl. 3 of the Khansari Order does not spell out how he was examining the matter on merits relating to the transfer of a Khandsari manufacturing unit. 1984 and Annexure 5' to the rejoinder affidavit. This order needs to be examined. The Joint Secretary apparently assuming powers of appeal under sub-cL (5) of Cl. 3 of the Khansari Order does not spell out how he was examining the matter on merits relating to the transfer of a Khandsari manufacturing unit. In this order, non-existing manufacturing unit has been by fiction, assumed to exist. The Joint Secretary in paragraph 2 notices the record of the case and mentions that at the place where the manufacturing unit is meant to exist it does not. In paragraph 3, a reference is made to the Additional Commissioner (Sugar) Meerut suggesting that the manufacturing unit may be assumed to exist. Apparently the manufacturing unit was uprooted from village Sekheda and intended to be transferred to village Shakarpur. The unit was not found to be existing at either of the places. By the order of 26 Dec. 1984, three circumstances were occasioned. First, the manufacturing unit was permitted to be transferred from Tilak Ram to the partners of respondent No. 3. Secondly, a non-existing manufacturing unit was assumed to be existing. Third, the transfer of the manufacturing unit from one village to another was permitted. Several other permissions were also granted but these at present may not be relevant. 11. Having granted a licence, rightly or wrongly, the licensing authority on 10 Sept. 1985 issued a show cause notice to the respondent No. 3 seeking an explanation why the licence for the season 1984-85 be not cancelled as the manufacturing process did not commence nor had the unit been established. The affidavit dated 29 Sept. 1985 filed on behalf of respondent No. 3 acknowledges the default and simultaneously gave an assurance that the licence for the season 1985-86 be renewed on the condition that should the respondent No. 3 not commence production by Nov. 1985 then the licence for the season 1985-86 be cancelled. These facts are on record in the order of the Licensing Authority dated 26th Aug. 1986 (Annexure 11 to the rejoinder affidavit). The order of 26 Aug. 1986 virtually records that the so-called khandsari manufacturing unit of respondent No. 3 did not operate either in the season 1984-85 or 1985-86 despite opportunities granted by renewing the licence upon an undertaking given by the partners of respondent No. 3. 1986 (Annexure 11 to the rejoinder affidavit). The order of 26 Aug. 1986 virtually records that the so-called khandsari manufacturing unit of respondent No. 3 did not operate either in the season 1984-85 or 1985-86 despite opportunities granted by renewing the licence upon an undertaking given by the partners of respondent No. 3. The licence of respondent No. 3 was cancelled by an order of 26 Aug. 1986. A request for renewal of the licence for the season 1986-87 was declined by an order of the licensing authority dated 24 Sept. 1986 (Annexure 12' to the rejoinder affidavit). In the order of 24 Sept. 1986 the licensing authority drew the reference to the context of the earlier years and placed on record that the licence had been cancelled and the question of its renewal does not arise. 12. Against the cancellation of the licence by an order of the Licensing Authority dated 26 Aug.1986 in reference to the season 1984- 85, the respondent No. 3 filed a representation to the State Government, in effect, seeking the licence. The representation is Annexure 9' to the rejoinder affidavit. Against the order of 4 Sept. 1986 by which the licence for the season 1986-87 was cancelled no representation was filed. 13. The State Government by an order of 7 January, 1987 allowed the appeal and in effect directed that the licence be granted to the respondent No. 3 on the basis of the machinery installed for the process and manufacture of gur. This order of 7 Jan. 1987, has been impugned in the writ petition. The writ petition was filed on 13 Jan. 1987 and an ad interim order was passed to the effect that the respondent No. 3 would not manufacture unless it has already commenced the process of manufacture. On the next day, 14 Jan. 1987, the licence of respondent No. 3 was again renewed for the season 1986-87 up to 30 Sept. 1987. By an application made by the sugar factory a learned Judge of this Court passed an order to the effect that any renewal of the licence made by the State Government respondent No. 3 would be subject to orders which would be passed in the writ petition. 14. 1987. By an application made by the sugar factory a learned Judge of this Court passed an order to the effect that any renewal of the licence made by the State Government respondent No. 3 would be subject to orders which would be passed in the writ petition. 14. The merits of the writ petition, thus, are to be examined upon the following issues : (1) Whether the licence under the Khandsari Order of 1987 could be transferred, and (2) Whether it could be transferred within the .reserved area' of a sugar factory, and does the sugar factory have the right to be heard before such a licence is granted or permitted to be transferred? 15. The dominant purpose is to protect the 'reserved area'. Thus, the grant of a licence in a reserve area is fraught with limitations. 16. The policy of the State Government declared, year after year, for granting licences, under the Khandsari Order, is compatible with the legislation on the subject. The State Government has consistently maintained that new licences cannot be granted nor would transfer of a licence in a reserved area be permitted. The norms and criteria upon which a licence would be granted have been settled. 17. The Court will examine the first proposition : whether the licence under the Khandsari Order can be transferred? 18. On this aspect on behalf of the contesting respondent No. 3, no submission has been offered at the time of arguments. The licence to operate a Khandsari unit is granted in pursuance of cl. 3 of the aforesaid Order. The licence is prescribed under Schedule 1 to this Order. 19. The relevant provisions of this clause, in reference to the context are : - "3. Grant of licence : (1) No manufacturer shall without obtaining from the Licencing Authority a licence, in the form prescribed in Schedule 1 undertake or carry on any process concerned with the manufacture of khandsari sugar by means of a power crusher, bel or centrifugal. Provided that no licence shall be given to any person who is minor. (2) .................................. (3) .................................. Provided that no licence shall be given to any person who is minor. (2) .................................. (3) .................................. 4) An application for the grant or renewal of a licence shall be disposed of by the Licensing Authority expeditiously and shall not be rejected except in case where the application has not been made by the prescribed date or on the prescribed form or is incomplete or is not accompanied by proof of the payment of the requisite fee or the Licensing Authority is of the opinion that it is necessary expedient so to do in the public interest with a view to (a) regulating the Khandsari Sugar Manufacturing Industry in the best interest of the Industry, or (b) avoiding uneconomic concentration of Khandari units in any area, or (c) ensuring in a reserved or assigned areas adequate supplies of sugar cane to a factory : Provided that while disposing of an application for grant or renewal of a licence the Licensing Authority may also take into consideration. (a) the conduct of the application in carrying on any process of manufacture of Khandsari sugar prior to the date of application including the previous contravention, if any, of any provision of this order or conditions of the licence, and (b) the total continuous Period for which the applicant held licence under this order to the date of the application: (c) the default, if any, made by the applicant in payment of the dues under the U.P. Sugarcane (Purchase Tax), Act 1961. (5) An application aggrieved with the order of the Licensing Authority under sub-cl. (4) may within thirty days from the date of such order prefer an appeal to the State Government decision thereon shall be final." 20. The first condition of the licence is that it cannot be transferred. It reads : "1. The licence is non-transferable". Thus the licence which was held originally by the minors through their guardian, and subsequently by the guardian, Tilak Ram could not be transferred, and the entire exercise put in motion by respondent No. 3 to procure a licence upon transfer from Tilak Ram was an illegal exercise. There can be no application seeking a transfer nor does the Khandsari Order permit transfer, this is the stipulation of law. There can be no application seeking a transfer nor does the Khandsari Order permit transfer, this is the stipulation of law. Thus, at every given time, the licence by transfer and simultaneous renewal to respondent No. 3, and it does not matter when this may have happened was illegal. 21. There is a purpose why such a condition has been stipulated that a licence will not be transferable. The explanation is available from condition No. 4, reference Schedule 1 of the licence, which puts an obligation on the holder of a licence that should the power crusher or the Khandsari unit be transferred then intimation of such transfer would be given to the licensing authority or the Khandsari Officer within a week of such transfer. 22. There is purpose for making a. reference to the expression 'reserved area" in the Khandsari Order in the definition clause and sub-cl. (4) (c) of Cl. 3 of the Order, aforesaid. The intention is to protect, monitor and regulate a 'reserved area' for the aim for which it is created. To appreciate the rationale of making a reservation or grant of a licence, in reference to the context, the definition of "reserve area" in the Khandsari Order, the Sugarcane (Control) Order 1966 and the U.P. Sugarcane (Regulation of Supply and ,Purchase) Act, 1953, is relevant. 23. The definition of "reserve area" in ,the aforesaid legislation is : "2.(n) : "Reserved area" shall mean the area reserved for a factory under an order for reservation of Sugarcane areas made under Rule 125-B.of the Defence of India Rules, 1962, and when no such order is in force, the area specified in an order made under S. 15, (Sugarcane (Regulation of Supply and Purchase) Act 1953) 2.(m) "Reserve area" shall mean the area reserved for a factory under an order made under rule- cl. (1) of cl. 6 of the Sugarcane ,(Control) Order, 1966 and/or an order made ,under S. 15 of the Uttar Pradesh Sugarcane ,(Regulation of Supply and Purchase) Act, 1953." (Khandsari Sugar Manufacturer Licensing Order 1967) "2(j) "Reserved area" means any area where sugarcane is grown and reserved for a factory under sub-cl. (1)(a) of Cl. 6," (Sugarcane (Control) Order 1966) 24-25. More or less a consistent policy has been followed by the State Government and the policy in this regard in reference to the years 1983-84, 1984-85,1985-86 and 1986-87 is consistent. (1)(a) of Cl. 6," (Sugarcane (Control) Order 1966) 24-25. More or less a consistent policy has been followed by the State Government and the policy in this regard in reference to the years 1983-84, 1984-85,1985-86 and 1986-87 is consistent. The policy of the State Government has been placed on record in Annexures 1, 2, 3 and 4, respectively, to the ,rejoinder affidavit. The broad features of the policy are, no new licence would be granted to operate a power crusher within a reserved area of a sugar factory, that outside the reserved area' there would be no restriction on granting a licence, that in the event of a new sugar factory being established, should there be a power crusher existing before the area has been reserved for a sugar factory then it would be assumed that upon a sugar factory commencing crushing operations the licence would transfer the manufacturing process outside the reserved area and that a transfer of the licence from the reserved area of one sugar factory to the reserved area of another sugar factory will not be permitted. 26. It is for this reason that the State monitors and keeps track of any crusher or khandsari unit disposed of by a licence to another person, a condition prescribed in sub-cl. (4) of the licence, appended as Schedule 1. A perusal of the Khandsari Order, the conditions of the licence and the norms and the policy of the State Government declared consistently over the years imply that a transfer of a licence is not permissible. That it was permitted when the licence held by Tilak Ram was transferred to the partners of respondent No. 3, was an illegal action. The action permitting transfer cannot be sustained either under the Khandsari Order or the terms of the licence held by Tilak Ram or the policy of the Government. The best course would have been for the respondent No. 3 ,to have purchased the Khandsari unit from Tilak Ram acting as guardian of the minors and dismantle the plant and machinery and set it outside the reserved area of the :sugar factory. The best course would have been for the respondent No. 3 ,to have purchased the Khandsari unit from Tilak Ram acting as guardian of the minors and dismantle the plant and machinery and set it outside the reserved area of the :sugar factory. On this aspect the Court places on record a statement made upon instructions by learned counsel for the petitioner that should the respondent No. 3 dismantle the manufacturing unit and set it up outside the reserved area of the sugar factory, the company Simbhaoli Sugar Mills Limited, Simbhaoli would undertake to arrange for the transfer of the machinery, equipment and plant to outside the reserved area. The statement made on behalf of the occupier of the sugar factory is being set on record. There was no response to it on behalf of the respondent No. 3. 27. This now leaves the consideration of the other aspect : Whether a sugar factory has a right to be heard before a new licence is granted under the Khandsari Order within its reserved area. 28. It is now on record, that what the respondent No. 3 held was a new licence upon a transfer from Tilak Ram. Notwithstanding that transfer of a licence is not permitted into a "reserved area", this aspect is being examined as it was the only aspect argued on behalf of respondent No. 3. It was contended that the reserved area is not the private reserve of a sugar factory and thus a licence under the Kandsari Order is free to be transferred notwithstanding that it is within a reserved area of a sugar factory. 29. This Court has already examined the policy of the State Government to the effect that transfer within a reserved area is not permissible. Assuming that it could be permitted would a sugar factory have the right to be heard if a new licence is being granted within its reserved area under the Khandsari Order? In reference to the context, the question of the right to be' heard' consequent upon a reserved area of a sugar factory being threatened by any person other than an occupier of the sugar factory has now been settled in the decision of the, Supreme Court in Re : Purtabpur Co. Ltd. case, AIR 1970 SC 1896 (supra) and of this' Court in re : Shanker Sugar Mills Ltd. (supra). Ltd. case, AIR 1970 SC 1896 (supra) and of this' Court in re : Shanker Sugar Mills Ltd. (supra). A disturbance of a reserved area creates a lis between the sugar factory and the person who intrudes into it and the State is obliged to hear the sugar factory before disturbing the reserved area. The argument on behalf of the respondent No. 3 that the sugar factory has no locus standi to be heard by the State Government in the matter relating to the grant of a new licence in its reserved area, is,, thus, misconceived and erroneous. 30. A reserved area is assigned primarily for a sugar factory and this is clear from the definition of a reserved area in S. 2(m) of the Sugar Cane (Regulation of Supply and Purchase) Act 1953. This definition has to be read with the expression "reserved area" as contained in the Sugarcane (Control) Order 1966 and the Khandsari Order of 1967. This leaves no doubt that a certain area where sugarcane is grown is reserved for a sugar factory which produces sugar through the vacant process. The mechanics of the reservation of areas for sugar factories have, been noticed by he Supreme Court in Re : Purtabpur Co. Ltd., AIR 1970 SC 1896 (supra). When an area is reserved for a sugar factory it casts certain obligations upon a sugar factory for the development of the reserved area and a relationship with the cane growers. The area is reserved for the requirement of a sugar factory. An observation of the Supreme Court in this context, in paragraph 4 of the judgment in re : Sri Ganesh Sugar Works v. State of Haryana is to be noticed : "4 ................................. It is a matter of common knowledge that the Sugarcane Control was made in the interest of growers of sugarcane primarily and also in the interest of the sugar factories, that is, factories engaged in the manufacture of sugar by the vacant process and in the ultimate analysis in the interest of the consumers by making sugarcane available or sugar production ................................ There can be no question that viewed from the viewpoint of production that it is advantageous to divert as much sugarcane as is possible to sugarcane factories insetad of Khansari units. Even so Khandsari units flourish, as is generally known because of by- product of molasses. There can be no question that viewed from the viewpoint of production that it is advantageous to divert as much sugarcane as is possible to sugarcane factories insetad of Khansari units. Even so Khandsari units flourish, as is generally known because of by- product of molasses. As experience showed that Khandsari units are better able to tap the growers of sugarcane, it becomes necessary for the Government to reserve areas for sugar mills. Otherwise, sugar mills would have to remain idle for long period unable to withstand the competition of Khansari units in reaching sugar cane growers. It was for that purpose, that is, with a view to prevent sugar factories from remaining idle by making available to' them sufficient quantities of sugarcane that the idea of reserving areas for sugar factories was conceived .............................." 31. It is important for the sugar factory to, crush sugar cane within a certain period so that it may achieve the optimum recovery. A, sugar factory is bound by an agreement with the cane growers with a reciprocal obligation that sugar cane will be sold to the sugar factory and the latter will purchase from the cane growers in its reserved area. It is in, these circumstances that the State regulates the supply of sugar cane in a reserved area. This Court is not going into the details in the manner in which a reserved area is carve& out for each sugar factory by a complicated exercise in pursuance of the U.P. Sugarcane (Regulation of Supply and Purchase),-Act, 1953 and the rules framed thereunder read with the Sugarcane (Control) Order of 1966. These aspects of the matter have also been noticed in detail by the Supreme Court in the two decisions referred to above and by this Court in-the case of Shanker Sugar Mills Ltd. (supra). In these circumstances it cannot be contended on behalf of respondent No. 3 that the sugar factory has no locus standi to object upon a new licence being granted. This court has observed earlier, assuming that a new licence could be granted (which under the law and the policy of the State Government it cannot) even then a sugar factory is entitled to be heard by the State Government as a reserved or an assigned area has been chalked out for a sugar factory and not for a licencee intending to operate under the Khandsari Order 1967. 32. 32. Thus, looked at it on both aspects this Court finds that two illegalities have been committed. Firstly, the exercise of the respondent No. 3 in setting about to arrange-- for the transfer of the licence from its erstwhile owner. The law does not permit the policy of the State Government is in keeping with the law. The licence which may have been transferred to respondent No. 3 is an action which is ultra vires to the Khandsari Order 1967 and is declared as such. It is otherwise against the policy of the State Government. Secondly, assuming that the licence could be transferred, the exercise to consider a licence upon transfer within a reserved area cannot be granted without giving an opportunity to the occupier of the sugar factory and considering its views and objections. 33. Thus, the order of 7 Jan. 1987, Annexure 4' to the writ petition and all previous proceedings culminating in the transfer of the licence at the hands of the partners of respondent No. 3 amounts to permitting a new licence to operate within the reserved area of the petitioner sugar factory. This is illegal. The order of 7 January, 1987, is quashed. 34. Further the Joint Secretary, Udyog Anubhag-5, U.P. Lucknow, Assistant Sugar Commissioner/Licensing Authority, Meerut and the State of U.P. through the Sugar Commissioner, U.P. Lucknow respondents Nos. 1, 2 and 4, respectively, are hereby directed by a writ of mandamus that consequent upon the order of 7 January, 1987 being quashed it will ensure that respondent No. 3 Messrs Nagar Sugar Works, aforesaid, does not carry out the manufacturing process under a licence under the Khandsari Order 1967 within the reserved area of the sugar factory of the petitioner. It is clarified that should the respondent No. 3 make an application for the transfer of its plant and machinery to a place outside the reserved area of the petitioner sugar factory such an application would be considered by the licencing authority within one month of its being made. 35. The petition is allowed with costs.