1. The petitioners are either growers of sugar-cane or Co-operative Societies of Sugar-cane Growers. During the seasons, 1960-61 and 1961-62, they had supplied sugar-cam; to India Sugar & Refineries Ltd., Hospet (hereinafter referred to as the Factory) which is one of the respondents in all these petitions. In these petitions, under Article 226 of the Constitution, they have assailed the order of the Government of India made under Sub-clause (3) of Clause 5 of the Sugarcane (Control) Order 1966, exempting the Factory from payment of additional price for sugar-cane purchased by it during these two years. For one of those years, the exemption is complete and for another year, partial.
2. Before considering the contentions of the petitioners, it is convenient to look at the relevant legislation.
3. Parliament enacted the Essential Commodities Act, 1955, (hereinafter referred to as the Act) to provide in the interest of the general public, for the control of production, supply and distribution of, and trade and commerce in certain commodities.
4. Clause (a) of Section 2 of the Act defines 'essential commodities' to mean any of the classes of commodities set out in Sub-clauses (i) to (xi) of that clause. Food-stuffs are among the commodities included in that definition. Clause (b) of Section 2 defines 'food crops' as inclusive of sugar-cane.
5. In exercise of the powers conferred by Section 3 of the Act, the Central Government promulgated on 27-8-1955 the Sugar (Control) Order, 1955, and the Sugarcane (Control) Order, 1955, The former empowered the Central Government to fix the price or the maximum price at which any sugar may be sold or delivered. It was competent for the Government to fix different prices for different areas or different factories, or, different types or grades of sugar. Such price or maximum price had to be fixed having regard to the estimated cost of production of sugar.
6. The Sugarcane (Control) Order, 1955, empowered the Central Government to fix the price or minimum price to be paid by the producer of sugar to the grower of sugar-cane, and to direct payment thereof and also to regulate the movement of sugar-cane. The power to regulate the movement of sugar-cane comprised the power to prohibit or restrict or otherwise regulate the export of sugar-cane from any area for supply to different factories and the power to direct that no gur (jaggery) or sugar shall be manufactured from sugar-cane except under and in accordance with the conditions specified in a licence issued in this behalf.
7. The Sugar-cane (Control) Order, 1955, empowered the Central Government to fix different prices for different areas or different qualities of sugar-cam or on the basis of recovery of sugar from sugar-cane. In fixing the price of sugar-cane, the Government was required to have regard to
(i) cost of production of sugar-cane;
(ii) the return to grower from alternative crops; and the general trend of price of agricultural commodities; arid -
(iii) availability of sugar to the consumer at a fair price.
8. Cane growers appear to have re-presented to the Central Government that under the Sugarcane (Control) Order, they were compelled to supply cane to sugar factories at prices fixed by the Government, that sugar factories had made large profits and that growers should also have a legitimate share in such profits. Presumably on such representation Parliament enacted the Sugar-cane Control (Additional Powers) Act, 1962. Section 2 of that Act empowered the Central Government to amend the Sugarcane (Control) Order, 1955, with retrospective effect. Thereafter the Central Government amended the Sugarcane (Control) Order, 1955, by additional Clause 3-A which provides for payment of additional price for sugarcane purchased by a producer of sugar during each of thefour successive years beginning on 1-11-1958.
9. The Sugarcane (Control) Order, 1955, was replaced by a new Order, the Sue arcane (Control) Order, 1966, (hereinafter referred to as the 1966 Order). Clause 12 of the 1966 Order repealed the 1955 Order but provided that all orders made and all action taken under the repealed Order, which are consistent with the 1965 Order, shall continue in force and be deemed to be made or done in pursuance of the 1966 Order.
10. Clause 3 of the 1966 Order provides for fixation of minimum price of sugarcane payable by producers of sugar. Clause 5 of the 1966 Order which provides for payment of additional price of sugar cane purchased, is practically the same as Clause 3-A of the 1955 Order.
11. Sub-clause (1) of Clause 5 of the 1966 Order provides that where the producer of sugar or his agent purchases any sugar cane from a grower or growers Co-operative Society during each of the four successive years beginning on 1-11-1958, the producer shall, in addition to the minimum price of sugarcane fixed under Sub-clause (3) of Clause 3, pay to the grown or the Co-operative Society, as the case may be, an additional price, if found due, in accordance with the provisions of Schedule to the Order.
12. The Schedule to the Order contains a formula for computing the additional price. The factors which are included in that formula are, inter alia, the price of sugarcane the prices of sugar, and other bye- products, the excise duty on sugar, the cane cess, the purchase tax on sugar, the sucrose content of cane, the expenses on rehabilitation of the Factory, and subsidy given by the Central Government to the Factory. The profit made by a sugar factory is not one of the factors included in this formula.
13. Sub-clause (4) of Clause 5 of the Order provides that the Central Government may appoint any person or authority as it thinks fit, for the purpose of determining the additional price due from producer of sugar under Sub-clause (1), for each of the successive four years beginning on 1-11-1958, and that when the price is so determined it shall be intimated in writing to the producer of sugar and the growers' Co-operative Societies or the Local growers' association.
14. Sub-clause (5) of Clause 5 provides for an appeal to the Central Government from a decision under Sub-clause (4) fixing additional price. Such appeal may be preferred by any producer of sugar or grower of sugarcane or growers' Cooperative Societies, who or which feels aggrieved by such decision under Sub-clause (4). 15. Sub-clause (6) provides that the price determined under Sub-clause (4) or under Sub-clause (5), as the case may be, shall be paid at such time and in such manner as the Central Government may from time to time direct.
16. Sub-clause (3) of Clause 5 provides that if the Central Government is satisfied that during any year a factory had made no profit or had made inadequate profit, the Government may by order in writing, exempt either wholly or partially any producer of sugar from payment of additional price due from him under Sub-clause (1) in respect of sugarcane purchased for that factory during that year.
17. Most of the material facts in these petitions, are not in dispute.
18. The Additional Price Fixation Authority, by its order dated 3-7-1968, fixed the additional price payable by the factory to cane growers for sugarcane supplied to it during the seasons, 1960-61 and 1961-62, at Rs. 4-16 and Rs. 6.09 respectively per metric ton. Such additional prices were made payable over and above all payments made by the Factory to cane growers during those seasons.
19. Against such fixation of additional prices, neither the Factory nor cane growers preferred any appeal to the Central Government under Sub-clause (5) of Clause 5 of the 1966 Order. Hence, the decision of the Additional Price Fixation Authority became final.
20. But, the Factory, by its letter dated 10-7-1968, requested the Central Government to grant, under Sub-clause (3) of Clause 5, exemption from payment of such additional price. By its letter dated 11-9-1968, the Central Government granted total exemption from payment of additional price in respect of cane purchased by the Factory during the period 1-11-1961 to 31-10-1962, and partial exemption from payment of additional price in respect of sugarcane purchased by the Factory for the period 1-11-1960 to 31-10-1961-According to such partial exemption, the Factory had to pay for sugarcane purchased during the period 1-11-1960 to 31-10-1961, an additional price of only 70 paise as against the additional price of Rs. 4.16 per metric ton determined under Sub-clause (4).-
21. Before granting such exemption neither the sugarcane growers nor the growers' co-operative societies, were given notice of the Factory's application for exemption nor were they heard by the Central Government.
22. Messrs. K. A. Swamy, S. Shiva Swamy and N. S. Narayana Rao, appeared for different petitioner or petitioners. The several contentions urged by them may be formulated thus:--
(i) The Central Government could not have granted under Clause 5(3) exemption from payment of additional price when there was no appeal before the Central Government under Sub-clause (51;
(ii) If Sub-clause (3) of Clause 5 is construed as conferring an independent power to the Central Government to grant such exemption, then that sub-clause is unconstitutional, as it confers uncontrolled and arbitrary power;
(iii) As the Central Government did not observe the principles of natural justice before making the impugned order, that order is void; and
(iv) If it is interpreted that Sub-clause (3) does not impose any obligation to notify sugarcane growers and give them an opportunity of making their representation, then that Sub-clause itself is void.
23. Elaborating the first contention, Sri N. S. Narayana Rao, learned counsel for some of the petitioners, argued that the power conferred on the Central Government under Sub-clause (3) of Clause 5 of the 1966 Order, is not an independent power, but has to be read with Sub-clause 5(a) of that Clause and other relevant clauses and that an order under Sub-clause (3) can be passed only in an appeal before the Central Government under Sub-clause (5) and after following the well-known procedure relating to hearing of appeals.
24. On the other hand, Mr. D. Venu-gopalachary, learned Counsel for the Factory, contended that the power conferred on the Central Government under Sub-clause (3) is independent of powers conferred under Sub-clauses (1), (2) and (4) to (6). It was also contended by Mr. Venugopalachary that in fixing the additional price under Sub-clause (4) the profit of a producer of sugar or its adequacy is not taken into account as such profit and its adequacy do not constitute factors in the formula contained in the Schedule to the Order for determining the additional price, whereas under Sub-clause (3) in deciding whether the exemption from payment of additional price should or should not be granted, the only factors to be taken into account are the profit and its adequacy.
25. There is nothing in the language of Sub-clause (3) of Clause 5 to suggest that the power, to grant exemption is dependant on an appeal having been preferred under Sub-clause (5) from an order under Sub-clause (4) determining the additional price.
26. We think Mr. Venugopalachari is right in contending that the scope of an appeal is entirely different from determination whether any exemption should be granted. The factors which must weigh in determining whether exemption should or should not be granted underSub-clause (3), are entirely different from the factors which should be taken into consideration under Sub-clause (4) or (5) for determining the additional price. While the absence of profit and inadequacy of profit are the only factors to be taken into consideration for determining whether exemption from payment of additional price, should or should not be granted under Sub-clause (3), those factors are not found in the formula contained in the Schedule to the Order. It appears to us that the power to grant exemption under Sub-Clause (3) and the power to decide an appeal under Sub-clause (5), are entirely separate and independent powers, and the exercise of the power under Sub-clause (3) is not dependent on an appeal having been filed under Sub-clause (5).
27. Hence, we cannot accede to the contention of Mr. N. S. Narayana Rao that the Central Government could not have granted exemption from payment of additional price for sugarcane, as neither party had preferred an appeal under Sub-clause (5) from the determination of additional price under Sub-clause (4).
28. Alternatively, it was contended by learned Counsel for the petitioners that if the power conferred on the Central Government under Sub-clause (3) is held to be an independent power, then that Sub-clause is unconstitutional on the ground that it vests arbitrary and uncontrolled power on the Central Government. Learned counsel for the petitioners added that that Sub-clause contains no guiding principles as to how that power should be exercised.
29. Sub-clause (3) of Clause 5 of the 1966 Order, reads:--
'5. Additional price for sugarcane purchased:--
(3) If the Central Government is satisfied that during any year a factory has made no profit or has made inadequate profit, that Government, may, by order in writing, exempt either wholly or partially, any producer of sugar from payment of the additional price due from, him under Sub-clause (1) in respect of sugar-cane purchase for that factory during that year.'
30. Under the above sub-clause, the Central Government can grant exemption wholly or partially from payment of additional price only when it is satisfied that a factory has not made profit or such profit is inadequate. Thus the absence of profit and inadequacy of profit, form the guide-lines for exercise of power to grant exemption wholly or partially. Hence, it cannot be said the power to grant exemption is an uncontrolled and unguided power and is capable of being exercised arbitrarily.
31. Moreover; such power is conferred not on any minor official but on so highan authority as the Central Government, As stated by the Supreme Court in Pannalal Bindaraj v. Union of India, : 1SCR233 , the abuse of powers cannot easily be assumed where discretion is vested in high officials.
32. Learned Counsel for the petitioners next contended that as an exemption, wholly or partially, granted under Sub-clause (3) of Clause (5), affects the right of growers to get additional price for sugar-cane supplied by them to the factory so exempted, the Central Government should exercise such power judicially and should conform to principles of natural justice, and that as the Central Government did not issue to sugarcane growers or sugar-cane growers' Co-operative Societies, any notice of the application made by the factory for such exemption and as the Central Government did not hear them or afford them an opportunity to make their representation, the order of the Central Government granting exemption, made in violation of principles of natural justice, is void.
33. Alternatively, learned counsel for the petitioners contended that if Sub-clause (3) is to be interpreted as not imposing any obligation on the Central Government to notify and hear the parties, then that sub-clause must be held to be void inasmuch as it is opposed to principles of natural justice.
34. On the other hand. Mr. Venugopalachari contended that the power conferred on the Central Government under Sub-clause (3) is not a judicial or quasi-judicial power but purely administrative and there is no obligation on the Central Government to hear sugarcane growers or Growers' Co-operative Societies before granting such exemption.
35. Another argument advanced by Mr. Venugopalachari was that under Sub-clause (1) of Clause 5 the liability to pay additional price arises only when the Central Government directs under Sub-clause (6) of Clause 5, the time and manner of payment of such additional price and that before the Central Government makes such direction sugarcane growers do not get any right to claim additional price for sugarcane. Mr. Venugopalachari added that in the present cases the Central Government made such direction simultaneously with the order granting exemption under Sub-clause (3), that the sugarcane growers had not acquired any right to get additional prices before the Central Government granted exemption under Sub-clause (3), that they had no vested right which was affected by such exemption, and hence they could not claim any right to be heard or to make any representation, before the Central Government granted exemption under Sub-clause (3).
36. In the counter-affidavit filed en behalf of the Central Government, thestand taken is also that the power conferred on the Central Government under Sub-clause. (3) of Clause 5, is an administrative and executive one and hence no question of violation of principles of natural justice could arise. It was also pleaded on behalf of the Central Government that as there is no provision under Sub-clause (3) of Clause 5 to hear either sugar-cane growers or growers' Co-operative Societies or growers' Union or anybody else, the Central Government did not hear the petitioners or anybody else before granting exemption to the Factory from payment of additional price.
37. It is convenient to take up first the contention of Mr. Venugopalachari that the sugarcane growers had no accrued right to additional prices for sugarcane at the point of time when the Central Government granted exemption to the Factory, and hence had no right to be heard, or to be given an opportunity to make representations.
38. Sub-clause (1) of Clause 5 declares the right of sugarcane growers to get additional price for sugarcane supplied by them to a sugar factory during four years commencing from 1-11-1958, if such additional price is found due. Sub-clause (4) of that Clause provides for quantification of such additional price by the specified authority. Sub-clause (5) provides for an appeal from an order under Sub-clause (4). Sub-clause (6) merely provides for the Central Government giving direction as to the time and manner of payment of the additional price.
39. There is a close parallel between the several stages set out in Clause 5 of the 1966 Order and the different stages provided in a taxing statute. Just as a charging section of a taxing statute, contains a declaration of the liability to pay the tax if certain conditions exist or on the happening of a taxable event, Sub-clause (1) of Clause 5 declares the right of sugarcane growers to additional prices, if found due. Just as the provisions of the taxing statute, relating to assessment provide for quantification of the liability to tax as declared by the charging section, Sub-clause (4) of Clause 5 provides for quantification of such additional price. Sub-clause (6) of Clause 5 corresponds to the section in the taxing statute providing for issue of a demand notice specifying the time and manner of payment of tax assessed.
40. As pointed out by the Privy Council in Wallace Brothers & Co. Ltd. v. Commr. of Income-tax, AIR 1948 PC 118 at p. 119, the liability to tax arises by virtue of the charging section alone though the Quantification of the amount payable is postponed. Likewise, the right of sugar-cane growers to get additional price for certain years, if due, came into existence as soon as Clause 3-A was inserted in theSugarcane (Control) Order, 1955, though that right cannot be enforced until there is a determination of such additional price by the specified authority under Sub-clause (4,) and until the Central Government gives a direction under Sub-clause (6) as to the time and manner of payment. But the accrual of the right to additional price is not postponed till the Central Government issues such direction under Sub-clause (6),
41. Thus, we cannot accept the contention of Mr. Venugopalachari that at the time when the Central Government decided to grant exemption to the Factory, the sugarcane growers had no accrued right to additional price and hence no existing rights of such growers were adversely affected by such exemption.
42. As pleaded by the Central Government, it is true that Sub-clause (3) of Clause 5 does not expressly provide that the Central Government should hear or afford opportunity to make representation to. sugarcane growers or growers' Co-operative Societies or growers' Union or any person, before granting to a sugar factory, exemption from payment of additional price. But the mere absence of such express provision, is not decisive.
43. As pointed out by Gajendragadkar. C. J., who spoke for the Bench in Bhagwan v. Ram Chand, : 3SCR218 , it is not necessary that a statutory provision conferring power on an authority or body to deal with the rights of citizens, must expressly impose on such authority or body, an obligation to follow the principles of natural justice. Such an obligation may in some cases be inferred from the scheme of the relevant statute, its material provisions, the nature of the powers conferred on the authority or body, the nature of the rights of citizens affected by the decisions of such authority or body and other relevant circumstances.
44. In Province of Bombay v. Khusaldas S. Advani, : 1SCR621 , the Supreme Court laid down that if a statute empowers an authority, not being a Court in the ordinary sense, to decide disputes arising out of a claim made by one party under the statute which claim' is opposed by another party and to determine the respective rights of the contesting parties who are opposed to each other, there is a lis and prima facie and' in the absence of anything in the statute to the contrary, it is the duty of the authority to act judicially and the decision of the authority is a quasi-judicial Act.
45. In Bhagwan's case, : 3SCR218 Gajendragadkar, C. J., reiterated that if it appears that the authority or body has been given power to determiner question affecting the right of citizens, the very nature of the power could inevitably impose the limitation that the powershould be exercised in conformity with the principles of natural justice.
46. Learned Counsel for the petitioners maintained that granting of exemption from payment of additional price would affect the statutorily accrued right of sugarcane growers, and hence the decision on the claim of a factory for exemption, should be arrived at in conformity with principles of natural justice, that is, after notice to sugarcane growers or their representative institutions and after hearing their objections or after affording them an opportunity to make their representations.
47. On the other hand, Mr, Venugopalachari urged that the only requirement for granting such exemption is the satisfaction of the Central Government that the factory in question has made no profit or inadequate profit, that such satisfaction can be reached by examining the the audited profit and loss statement of that factory and its books of account and that sugarcane growers do not come into the picture at all in ascertaining whether the factory has made no profit or whether the profit is inadequate.
48. In the counter-affidavit on behalf of the Central Government, it is averred that on the application of the Factory under Clause 5(3), the Central Government throughly examined the question after ascertaining the facts and the financial position of the Factory as revealed from its printed accounts for the two years' in question and granted exemption.
49. Even if it be that the account books of the Factory constitute the principal material for ascertainment of the profit made by the Factory and the quantum of such profit, it cannot be said that such ascertainment is a matter purely between the Central Govt. and that Factory and the sugarcane growers who have supplied cane to that factory can have no say in the matter. As an exemption, whole on partial, granted under Sub-clause (3) of Clause 5 affects the statutorily accrued right of the sugarcane growers to get additional price, we think that a decision whether exemption should be given, assumes a quasi-judicial character and principles of natural justice require that sugarcane growers should be heard or afforded an opportunity to make their representation, before the Central Government decides the question of exemption. Such growers may show that the account books of the factory are not correct or are not reliable, or that some relevant factors have not been taken into account by the factory in arriving at the profit or loss or that the method of accounting or the mode of computing profit or loss, adopted by the factory; should not be accepted.
50. Assuming for the sake of argument that the satisfaction of the Central Government that a factory has made no profit or inadequate profit, does not assume quasi-judicial character, even then, we think fair play requires that sugarcane growers whose accrued rights are affected by such exemption, should be heard or given an opportunity to make their representation, before the Central Government reaches any decision on such question.
51. In Radheshyarn v. State of Madhya Pradesh, : 1SCR1440 , this is what S. R. Das, C. J., said in his leading judgment for the majority at p. 119:
'To say that action to be taken under Section 53-A (of the C. P. and Berar Municipalities Act, 1922) is an administrative action, is not to say that the State Government has not to observe the ordinary rules of fair play ... ...
In some case it may be necessary to give an opportunity to a party to have his say before an administrative action is taken against him ... ... ... ... ...'
52. In State of Orissa v. Binapani Dei, : (1967)IILLJ266SC . Shah, J., who spoke for the Court, said that even an administrative order which involves civil consequences, must be made consistently with the rules of natural justice. His Lordship added that the rule that a party to whose prejudice an order is intended to be passed, is entitled to a hearing, applies alike to judicial tribunals and bodies of persons invested with authority to adjudicate upon matter involving civil consequences.
53. In A.K. Kraipak v. Union of India, : 1SCR457 , the Supreme Court quoted with approval the following observations of Lord Parker, C. J. in In re H. K. (An Infant), (1967) 2 QB 617 at P. 630:
'But at the same time. I myself think that even if an Immigration Officer is not in a judicial or quasi-judicial capacity, he must at any rate give the immigrant an opportunity of satisfying him of the matters in the sub-section, and for that purpose let the immigrant know what his immediate impression is so that the immigrant can disabuse him. That is not, as I see it, a question of acting or being required to act judicially, but of being required to act fairly. Good administration and an honest or bona fide decision must, as it seems to me, require not merely impartiality, nor merely bringing one's mind to bear on the problem, but acting fairly; and to the limited extent that the circumstances of any particular case allow and within the legislative frame-work under which the administrator is working only to that limited extent do the so-called rules of natural justice apply which in a case such as this merely a duty to act fairly ... ...'
54. Hegde, J., who spoke for the Court in Kraipak's case, : 1SCR457 added that the dividing line between an administrative power and a quasi-judicial power, is quite thin and is being gradually obliterated, that the horizon of natural justice is constantly expanding and that arriving at a just decision is the aim of both quasi-judicial enquiries as well as administrative enquiries.
55. Whether the decision of the Central Government under Sub-clause (3) to grant exemption, is regarded as quasi-judicial or administrative, we think the sugarcane growers who supplied sugarcane to the Factory, should have been given notice and heard through their respective organisation, or allowed an opportunity to make their representation. As such growers were neither given notice nor so heard, or allowed such opportunity, the impugned orders of the Central Government granting such exemption, are void and must be quashed.
56. It becomes unnecessary to consider the alternative contention of learned counsel for the petitioners that if Sub-clause (3) is interpreted as not imposing any obligation to hear sugarcane growers, then that sub-clause must be held to be void. The other contentions of parties are left open.
57. In the result, we allow these petitions and quash the decisions of the Central Government exempting the Factory from payment of additional price wholly in respect of sugarcane purchased during the year 1-11-1961 to 31-10-1962, and partially in respect of sugarcane purchased during the year 1-11-1960 to 31-10-1961. But, it will be open to the Central Government to decide afresh the Factory's claim for such exemption, after issuing to the respective organisations of such sugarcane growers, notices stating the grounds for partial or total exemption, and after hearing them or affording them an opportunity to make their representations and after considering such representations.
58. In the circumstances of these petitions, we direct the parties to bear their own costs in these petitions.
59. Petitions allowed.