‘Factors considered not factually correct’: Kerala HC quashes preliminary sanction for Oasis liquor factory in Palakkad

In a major setback to the Kerala government, the Kerala High Court on Friday quashed the preliminary sanction granted to Oasis Commercial Private Limited for setting up an ethanol and liquor manufacturing unit in Palakkad, holding that the government’s decision was based on facts that were “not factually correct in its entirety”.

A Division Bench of Justices Sathish Ninan and P Krishna Kumar set aside the government order dated January 16, 2025, observing that it rested on incorrect premises. The court, however, clarified that the ruling would not prevent the state from reconsidering the company’s application afresh, after obtaining the necessary and accurate inputs.

The judgment came on a batch of Public Interest Litigations (PILs) filed by residents of Elappully grama panchayat, who challenged the preliminary sanction granted for establishing an ethanol plant, a multi-feed distillation unit, an Indian Made Foreign Liquor (IMFL) bottling unit, a brewery, a malt spirit plant, and a brandy or winery facility.

The court found serious inconsistencies in the government order regarding the location of the proposed unit. While the order repeatedly referred to the site as being at “Kanjikode”, it also stated that the company owned 24 acres of land adjoining the Kanjikode industrial area.

The bench noted that the land identified by the company was in fact located in the Elappully grama panchayat, 5 km away from Kanjikode, a contention raised by the petitioners and not disputed by the respondents. Even the Cabinet note described the project as being at Kanjikode, though it mentioned at one place that the land was adjoining the industrial area.

“In these circumstances, various factors which weighed with the Government while issuing the preliminary sanction are not factually correct in its entirety,” the court said.

Project proposal and sanction process
Oasis Commercial had applied to the Excise Commissioner on November 30, 2023, seeking approval and a letter of intent to establish a 500 KL capacity ethanol-cum-multi-feed distillation unit and allied facilities, with an estimated investment of ₹600 crore.

According to the court, based on reports from the Deputy Excise Commissioner, Palakkad (December 8, 2023), and the Joint Excise Commissioner, Central Zone (January 19, 2024), the Excise Commissioner recommended preliminary approval on February 6, 2024. Acting on this recommendation, the government issued the preliminary sanction.

Water availability under scrutiny
The petitioners also contended that Palakkad is a water-scarce region and that the project would require about 5,000 kilolitres of water per day, which could worsen groundwater depletion and pose serious risks to local residents.

The government order relied on a letter issued by the Kerala Water Authority (KWA) and the company’s proposed rainwater harvesting measures to conclude that groundwater exploitation would be avoided. However, the court found that no valid water consent was in place.

While the petitioners produced a KWA communication dated June 16, 2023, stating that sufficient water could be provided from the KINFRA water supply scheme, the Water Authority later stated in a counter affidavit that no formal consent had been issued as the scheme was not fully commissioned.

The bench observed that although the June 16 communication amounted to an explicit assurance, the government had relied on it while granting sanction, even as the authority later sought to dilute its commitment. The court also flagged the fact that the letter was issued on the very day the company applied for consent, raising doubts about whether any proper assessment preceded it.

Ethanol supply
The court further noted that the government had taken into account the company’s claim that it had been shortlisted by oil marketing companies under the National Policy on Bio-Fuels, and that the entire ethanol output would be supplied for fuel blending.

The petitioners argued that this assumption was based on a misreading of the relevant documents, a claim denied by the company.

On the allegation that the government order pre-empted statutory authorities and local self-government institutions, the court examined Section 14 of the Abkari Act, which mandates prior government approval before the Excise Commissioner can grant licences for distilleries and similar units.

The bench held that the preliminary sanction constituted the “previous approval” required under the Act and did not curtail the powers or duties of other statutory authorities.

“Unless prior approval of the Government is obtained, there is no point in the Company approaching other authorities,” the court said, adding that a Cabinet decision by itself did not override statutory processes.

Rejecting objections to the maintainability of the PILs, the court held that the petitioners, being residents of Elappully panchayat where the unit was proposed, had sufficient locus standi.

Responding to the High Court order, the Minister for Local Self-Governments said the court had not found any wrongdoing on the part of the government. The minister also pointed out that the court had made it clear there was no legal obstacle to reconsidering a fresh application, provided sufficient and proper documents supported it.

Meanwhile, George Sebastian, one of the petitioners and general secretary of the Assembly of Christian Trust Services (ACTS), welcomed the verdict, calling it a victory for “divine justice and the people’s struggle.” He thanked organisations and individuals who supported the months-long protest and legal battle led by ACTS, a collective of Christian churches.

Sebastian said vigilance over the proposed brewery project would continue in the coming days. He also announced that a public gathering would be held at Elappully on January 5, with advocates who appeared for the petitioners in the High Court case, along with various spiritual and social leaders, expected to attend.