A division bench of the Kerala high court on Tuesday quashed the Puthussery panchayat's order cancelling the licence given to PepsiCo India Holdings. The panchayat had alleged that the cola major's plant was depleting the water resources.

The judgement has been criticised by state Chief Minister V S Achuthanandan as the one issued without proper understanding of the Panchayati Raj Act. The chief minister added that the government would approach the higher court against the division bench order.

• Soft drinks, hard truths

PepsiCo had challenged the order of the village panchayat, in Palakkad district, through a writ petition.

The court order gives it the right to continue operating its plant in the Kanjikode industrial area that had been closed for almost a year.

K Suresh, president of the panchayat, said the court order was unfortunate, and asked for a review.

The bench, comprising Acting Chief Justice K S Radhakrishnan and Justice M N Krishnan, said the panchayat had no jurisdiction under the Panchayati Raj Act in the matter of issuing or cancelling licences as the factory is situated in an industrial area notified under the Kerala Industrial Single Window Clearance Board and Industrial Township Area Development Act of 1999.

The factory is situated at the Kanjikode Industrial Area in Puthussery village panchayat.

The panchayat had cancelled the licence alleging that the factory was exploiting ground water exceeding the permitted limits causing severe water shortage in the area.

It had ordered the company to remove the 2000 HP electric motor that had been used for drawing ground water.

The Puthussery village panchayat had issued a show-cause notice to the company in the midst of an agitation against its methods of using water in 2003 and cancelled the licence on August 22, the same year.