Protect entrepreneurs from baseless protests; industrial growth need of the hour in the State: Kerala High Court

Ahead of the Legislative Assembly elections, the Kerala High Court has called on political parties to assure voters that entrepreneurs in the State need not fear that their businesses may be abruptly shut down because of baseless public protests [Sudheer S & ors v State of Kerala & ors].

The Court emphasised that once all necessary legal clearances have been obtained by an industrial unit, no local authority could deny the unit's operators a licence to operate it solely on the basis of flimsy public protests.

Justice PV Kunhikrishnan observed that forcing a business to shut down because of unwarranted protests by a few people would undermine the rule of law and discourage entrepreneurs from investing in the State.

"This is the General Election time in Kerala. The political parties and the candidates should tell the electorate and get their mandate by saying that, if they are elected, no entrepreneur in Kerala who has obtained all statutory clearances from all authorities, including pollution and environment authorities, will be forced to close down their unit because of the protest of a handful of people if their apprehension has no basis. It is the duty of the elected representatives to convince the electorate at the time of the election itself that, once statutory clearance is obtained, nothing will happen, and industrial growth is the need of the hour in our state," the Court added.

The Court added that while public dissent is necessary in a democracy, the same cannot override legal permissions granted to an industry under law. Denying entrepreneurs the right to operate their industries would only affect the industrial growth of the State, the Court observed,

"If such a course (bowing down to public pressure to shut down industries that have been set up after securing all clearances) is tolerated, investment will be deterred, employment opportunities will wither, and law-abiding enterprises will betaught the wrong lesson that compliance is not protection," the Court stated.

The Court made the observation while dealing with a petition by two entrepreneurs who wanted to operate a hot mix plant (a unit producing road construction materials).

They told the Court that they had secured all necessary approvals to set up the plant, including consent from the Pollution Control Board and a no-objection certificate from health authorities.

In 2017, they filed an application before the Nellanad Grama Panchayat seeking permission to establish the hot mix unit. Since the Panchayat failed to respond within the deadline set under the law, the petitioner took it to mean that they had "deemed permission" under Section 236 of the Kerala Panchayat Raj Act, 1994 (Act) to establish the unit. Accordingly, the plant was set up.

However, the Panchayat later informed that they had rejected the petitioners' application on account of public protests to the functioning of the plant. The petitioners were eventually able to continue operating the plant after getting interim relief from a tribunal for local self-government institutions and with police protection provided on the High Court's orders.

The petitioners went on to upgrade their operations by forming a partnership firm and installing modern machinery worth crores. They filed another application under the 1994 Act seeking approval for these revised operations. This was, again, not decided within time and the petitioners took it to mean that they had deemed permission.

However, in 2023, the Panchayat issued a stop memo to halt the plant's functioning. The plant's operation was also obstructed by public protests by some local people. This led the petitioners to approach the tribunal and the High Court again for relief.

The petitioners later again filed new applications for approvals under the 1994 Act. However, the Panchayat refused to approve the operations. They noted that locals in the area had raised concerns about health risks that may arise due to the hot mix plant's functioning.

This led the petitioners to approach the High Court. It ordered the Panchayat to decide afresh in the matter. However, the Panchayat again rejected the application. It also maintained that a 2018 amendment to Section 233 of the 1994 Act - which provided that the local authority cannot outrightly reject applications for factory approvals but only impose conditions - would not apply in this case. The Panchayat reasoned that the machinery in respect of which the approvals were sought were set up by the petitioners before 2018.

This led the petitioners to once again approach the High Court for relief.

In its April 1 ruling, the High Court noted that the petitioners' grievance reflected a larger, systemic concern that governmental assurances may evaporate before they are enforced.

It rejected the Panchayat's reasoning for rejecting the latest application, considering that the said application was filed in 2025, meaning the 2018 amendment would apply.

In other words, the Court observed that the Panchayat no longer had the authority to reject the application, but could only impose conditions for the hot mix plant's functioning.

"Therefore, the Panchayat must allow the application and, if necessary, may also impose conditions while granting permission. It should be done forthwith to strengthen faith in the rule of law and to boost the morale of genuine entrepreneurs who want to invest in Kerala," the Court held.

It proceeded to direct the Panchayat to reconsider the petitioners' latest application in accordance with law.

The petitioners were represented by Senior Advocate Renjith Thampan and advocate Ajith Krishnan.

Advocate MH Hanilkumar appeared for the Nellanad Grama Panchayat

Advocate Kaleeswaram Raj represented other respondents.

[Read Judgment]