J. K. Mehra, J. ( 1 ) THIS writ petition has been filed by the petitioner feeling aggrieved by the orders of the respondent dated 12/14 December, 1988, 4th April, 1989 and 15/16th May, 1989. The case of the petitioner has been that the petitioner was enjoying 25% increase in their production capacity under a press note of 1975. While that was still in force, Government of India issued another press note on 1st January, 1986 which reads as under:. "government in their press note of 21st August 1975, had announced that in cases where increased output is the direct consequence of replacement of old equipments, the necessary amendment in the Industrial licence will be granted liberally and on the basis of a special procedure provided that:- 1. Such replacement or modernisation of equipment does not result in any encroachment of products reserved for the small scale sector; and 11 II. There is no net increase in the outgo of foreign exchange. 2. In the present context of Government s thrust on encouraging further modernisation/ replacement/renovation it has been decided that any increase in capacity arising out of such modernisation/replacement/renovation upto 49% of the licensed capacity may be recognised and endorsed on the licence. The 579 locational policy will also not apply to such modernisation/replacement/renovation. It should not however, result in encroachment of products reserved for the small scale sector. 3. When the replacement is by way of imported equipment requiring prior approval of CG Committee, the Committee will accord approval for the proposed imports arising from replacement/modernisation/renovation, after satisfying itself that the proposal does not result in encroachment of products reserved for small scale sector and will also ensure that the capacity does not exceed 49% of the licensed capacity as a result of the proposed imports. On receipt of CG Committee s approval, the consequential amendment in the industrial licence will be carried out by the Secretariate for Industrial Approvals. 4. In respect of all industrial undertakings including MRT/fera companies, the cases of replacement by way of indigenous equipment. It has been decided to adopt a simplified procedure and the Joint Secretary concerned with industry in the administrative Ministry has been authorised to receive such proposals and to accord necessary industrial approvals after satisfying himself that the conditions stipulated in paragraphs (2) and (3) above have been fulfilled. The necessary endorsement on Industrial. It has been decided to adopt a simplified procedure and the Joint Secretary concerned with industry in the administrative Ministry has been authorised to receive such proposals and to accord necessary industrial approvals after satisfying himself that the conditions stipulated in paragraphs (2) and (3) above have been fulfilled. The necessary endorsement on Industrial. Licences will however be carried out by the Secretariate for Industrial Approvals. "the object of such policy was primarily to give a thrust to modernisation/ replacement/renovation and consequential increase in capacity upto 49% of the licensed capacity. The only conditions required to be satisfied were those set out in paras 2 and 3 quoted above. ( 2 ) FOLLOWING the said press note the petitioner filed an application requesting endorsement of the enhanced licensed capacity to the extent of 49% on its licence. Such enhancement was to take place after the requisite modernisation and replacement of the old equipments. In support of need for modernisation the petitioner had submitted the certificate from a Chartered Engineer. On the said application the Director Vanaspati passed a very short and criptic order on 12/14th December, 1986. That order by no means can be described as well considered decision and cannot be sustained at the very outset. However my attention has been drawn by counsel for the respondent to order dated 4th April, 1989 wherein reasons for refusal to endorse the additional capacity on the licence had been furnished. I need not address myself to order dated 15/16th May. 1989 purporting to be final rejection by Government of India since this order also does not give any reason but merely relies upon the order dated 4th April, 1989. ( 3 ) IN the writ petition there is no plea of malafides on the part of the respondents nor is there any challenge to the existence of power with the respondents to grant or withold such enhancement in the licensed capacity. The only challenge to the decision of the Government is on the ground of arbitrariness and that of basing its decision on reasons which are not germane to the conditions prescribed in the Press Note of 1st January, 1986. ( 4 ) IN order to find out whether the decision dated 4th April, 1989 is arbitrary or not germane to the conditions laid down in the Press Note of 1st January, 1986, the said decision may be adverted to. ( 4 ) IN order to find out whether the decision dated 4th April, 1989 is arbitrary or not germane to the conditions laid down in the Press Note of 1st January, 1986, the said decision may be adverted to. The reasons for declining the request of the petitioner are set out in para-2 of the said decision which is reproduced hereunder:- "2. As you are aware, vanaspati industry is basically processing industry converting edible oils into vegetable oil products after necessary refining. A Vanaspati plant comprises of various types of vessels/cells/filling tanks and boilers etc. Unlike, in the case of engineering industry there has not been any radical change in the processing technique of vanaspati. Hence, in the case of vanaspati industry there has not been much technological developments or sophistication in the technical know-how resulting higher sizes of equipments of different designs yielding increased productive capacity necessitating, 49% increase in the productive capacity. The replacement of old/worn-out vessels/cells/boilers etc. with new ons of compatible sizes had been there throughout the decades and are continued to be undertaken by vanaspati units in the normal course without seeking any increase in productive capacity. For example, recently, Modi Vanaspati has modernised its unit by replacing equipment and renovating their plant by spending about Rs. 9 crores. Further, as you are aware, there had been persistent gap between availability and demand for indigenous edible oils permitted for the manufacture of vanaspati. To meet the deficit, import of edible oils has to be restored by the Government by incurring heavy foreign exchange outgo. The proposed expansion would result in creation of additional vanaspati capacity which would obviously require extra import resulting in additional burden on the recoius foreign exchange. Any deviation in the case of Lipton India Ltd. allowing 49% increase in licensed capacity on the ground of the so-called modernisation/ replacement/renovation of old equipments would cause resprecussion from other vanaspati units thereby resulting in unwarranted creation of additional capacity. In this connection, it may be recalled that sometime back this matter was discussed by the Government at higher level when the representative of Vanaspati Manufacturers Association was also present and it was held by the Department of Industrial Development that in the case of vanaspati industry, it would not be justified to allow 49% increase in productive capacity on the ground of so-called modernisation/replaccment/renovation of old equipments. "a reading of the said reasons gives an impression that the authorities carried the impression that such enhancement could be granted only if there is radical change in the processing technique or technological development of sophistication in the technical know-how resulting In higher size of equipment of different designs yielding increase productive capacity, necessitated 49% increasc in the productive capacity. In its decision the respondents have not disputed the right of the petitioner to replace the old-worn-out vessels/cells/boilers etc. with the new ones of complibic sizes. The authorities have erroneously referred to the case of Modi Vanaspali who, it Is staledhas modernised its unit by replacing equipments without enhancing its capacity. At the same time it is stated said Unit of Modis is before BIFR having serious running problems. I think such a comparison was erroneous. The other considerations which weighed with the authorities in declining is the likelihood of heavy foreign outflow by increased productive capacity. I think such a comparision was erroneous. The third reason is the likelihood of resprecusions on other vanaspli unils, thereby resulting in unwarranted creation of additional capacity. Before I go to the merit of these reasons there is one more additional factor to be kept in mind which is a subsequent event in the nature of new industrial policy of 1991 wherein it has been laid down that in case any unit is established or existing outside the urban aglomaration as specified in the said policy there would be no need of industrial licence and the enterprenures are free to produce as much as he is capable of producing. On an enquiry it was revealed that the plant of the petitioner could not qualify for its benefit because it falls in urban aglomaration of Ghaziabad. ( 5 ) VIEWED in the present context I feel that the decision of 4th April, 1989 calls for a reconsideration firstly because the very proposal of the petitioner is to make use of the indigenous surplus edible oils such as rich-bran oil, soyabean oil, cotton seed oil, sun-flower oil and seal oil etc. and as such there is no danger of foreign exchange outflow. and as such there is no danger of foreign exchange outflow. Secondly the question of any resprecussiens- on other vanaspati units should not worry the authorities now as they have already decontrolled the production capacity of units which are coming up or have come up outside the urban aglomaration in terms of the industrial policy of 1991 thereby giving a total go-bye to said consideration which were holding the field earlier. The only other consideration would be as to whether the increased capacity can be achieved by replacement or renovation of the existing plant and equipment of approximately the same size by and if making the plant run more efficiently by such replacement of equipment, modernisation of ttie existing unit and by employing latest methods of production and management then there is no reason for the petitioner should not being granted the enhanced licensed capacity. ( 6 ) BEFORE disposing of the petition I may add that in response to my question as to whether the increase in capacity would result in any kind of danger to the environment, the reply was in the negative by the respondents. I am therefore of the view that the decision of 4th April, 1989 itself calls for immediate reconsideration by the authorities as the reasons furnished therein are not germane to the qualifications and the criteria laid down in the press note dated 1st January, 1986. ( 7 ) IN the circumstances rule nisi is made absolute and the matter is remanded to the authorities entrusted with the task of examining such requests for a fresh consideration of (he application of the petitioner, with the direction that they will re-examine the entire matter in the light of the discussion above and decide the application of the petitioner afresh within two months from today. Before taking final decision the authorities will give a notice to the petitioner and grant them hearing. if so asked for by the petitioners. No further orders are necessary. The parties are left to bear their own costs. Copy of the order be given dasti to counsel for the parties.