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The Union of India (Uoi) Vs. Shervani Sugar Syndicate and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtAllahabad High Court
Decided On
Case NumberSpecial Appeal No. 577 of 1971
Judge
Reported inAIR1973All190
ActsSugarcane (Control) Order, 1966
AppellantThe Union of India (Uoi)
RespondentShervani Sugar Syndicate and anr.
Appellant AdvocateTej Narain Sapru, Sr. Standing Counsel
Respondent AdvocateM.A. Ansari, Adv.
DispositionAppeal dismissed
Excerpt:
.....the order compulsory before fixing basic price of sugar. - - it is, therefore, obvious that the central government failed to take into consideration the relevant factors as laid down in sub-clauses (d) and (e) of clause (3) (i) of the control order, and the notification dated 12th november, 1970, fixing the price of sugarcane payable by the petitioner could not be legally sustained. the view taken by the majority of the collective board of revenue in making the order dated 19th october, 1936, which is now complained of, is that the requirement to 'have regard to' the provisions in question has no more definite or technical meaning than that of ordinary usage, and only requires that these provisions must be taken into consideration. ' these observations clearly imply that the power has..........commodities. under section 3c of the act the central government is empowered to fix the price of sugar. clause (3) of the sugarcane (control) order, 1966, authorises the central government to fix the price of sugarcane and runs as follows:-- '(3) (i) the central government may, after consultation with such authorities, bodies or associations as it may deem fit, by time to time, fix the minimum price of suger-cane to be paid by producers of sugar or their agents for the sugarcane purchased by them, having regard to- (a) the cost of production of sugarcane; (b) the return to the grower from alternative crops and the general trend of prices of agricultural commodities; (c) the availability of sugar to the consumer at a fair price; (d) the price at which sugar produced from sugarcane is.....
Judgment:

K.N. Seth, J.

1. This appeal is directed against an order of a learned Single Judge of this Court issuing a direction to the Central Government to re-fix the price of the sugarcane supplied to the petitioner's factory during the 1970-71 crushing season in the light of the observations made in the impugned judgment. It was also directed that if on refixation of the price the petitioner was entitled to a refund of any portion of the amount deposited in pursuance of the interim order of this Court, it shall be refunded to the petitioner on a certificate of the Cane Commissioner, but in case the petitioner was required to pay further sum, that would be payable to the sellers of thesugarcane according to the refixed price of the quantity supplied by them.

2. The problem of fixation of price for sugarcane supplied to the sugar factories by the sugarcane growers and the price of sugar sold by the sugar factories was tried to be solved by the Government by adopting various methods from year to year. For the year 1970-71 by a notification dated 12th November 1970 (hereinafter referred to as the Notification) the Central Government, in exercise of the powers conferred by Clause (3) of the Sugarcane (Control) Order, 1966, made under the Essential Commodities Act, 1955, fixed the minimum price payable by the owners of the vacuum pan sugar factories all over India for the sugarcane supplied to them during the aforesaid period. The minimum sugarcane price payable by the various sugar factories were set out in the Schedule to the Notification. Under the Schedule the Neoli Sugar Factory, owned by the petitioner Messrs. Shervani Sugar Syndicate (Private) Limited, was required to pay Rs. 7.57 per quintal. The principles on which the prices in the Schedule were fixed for the various factories were set out in a Circular letter of the same date, issued to all the sugar factories in India, as follows:--

'The minimum prices have been fixed on the basis of a basic minimum price of Rs. 7.37 per quintal linked to a recovery of 9.4 per cent or below, with a premium of 6.6 paise instead of 5.36 paise per quintal, as in the preceding year, for every 0.1 per cent increase in recovery above 9.4 per cent.'

The petitioner challenged the validity of the Notification principally on the ground that the minimum prices fixed by the Notification on the principle laid down in the Circular Letter was in contravention of Clause (3) of the Sugarcane (Control) Order, 1966. It was contended that the Central Government had not taken into consideration the price at which the sugar produced by the factories was sold by the producer and had exaggerated the price of the sugarcane supplied to the petitioner's factory.

3. At this stage it may be noted that the method of supply of sugarcane to the sugar factories was regulated by the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 (U. P. Act XXIV of 1953). Under the aforesaid Act a sugar factory was required to furnish an estimate of the quantity of cane which would be required by the factory to the Cane Commissioner appointed under that Act. The Cane Commissioner, on receiving the estimate, reserves or assigns an area of sugarcane in consultation with the factory and the Cane Growers' Co-operative Socie y and the factory is expected to purchase all the cane grown and offered in this area. The normal crushing season for sugarcane extends from November to April but due to abundance of growth of sugarcane, the crushing season is extended even upto July.

4. The Essential Commodities Act, 1955 empowers the Central Government to control production, supply, distribution etc., of essential commodities. Under Section 3C of the Act the Central Government is empowered to fix the price of sugar. Clause (3) of the Sugarcane (Control) Order, 1966, authorises the Central Government to fix the price of sugarcane and runs as follows:--

'(3) (i) The Central Government may, after consultation with such authorities, bodies or associations as it may deem fit, by time to time, fix the minimum price of suger-cane to be paid by producers of sugar or their agents for the sugarcane purchased by them, having regard to-

(a) the cost of production of sugarcane;

(b) the return to the grower from alternative crops and the general trend of prices of agricultural commodities;

(c) the availability of sugar to the consumer at a fair price;

(d) the price at which sugar produced from sugarcane is sold by producers of sugar; and

(e) the recovery of sugar from sugar-cane.

Provided that the Central Government or with the approval of the Central Government the State Government may, in such circumstances and subject to such conditions as it may specify allow a suitable rebate in the price so fixed.

Explanation -- Different prices may be fixed for different areas OP different qualities or varieties of sugarcane.'

5. The challenge to the Notification was based on the ground that the provisions of Sub-clause (d) was ignored and a wrong principle was applied with regard to Sub-clause (e) which relates to the recovery of sugar from sugarcane. It was asserted that for the year 1970-71 the prices of the sugar sold by the petitioner's factory had shown a downward trend, but this factor was totally ignored by the Government. With regard to the provisions of Sub-clause (e) it was pointed out that the normal season of a sugar factory was November to April which is extended even upto July depending on the availability of the sugarcane to be crushed and the recovery of sugar has to be calculated on the basis of the actual recovery made during the entire crushing season of a factory and the relevant period would be the crushing season of the year for which the sugarcane price is fixed. The contention was that in fixing the sugarcane price for the year 1970-71, the recovery made during the entire crushing season 1970-71 should alone have been taken into consideration. The price of the sugar-cane could not be fixed on the basis of the recovery of a preceding year or on the basis of the recovery of only a period of the crushing season 1970-71. 6. It is apparent from the counter-affidavit filed on behalf of the Union ofIndia that in fixing the sugarcane price for the year 1970-71 the Central Government had taken into consideration: (i) the recovery of the factory of the preceding year; (ii) the recovery for the period of optimum recovery or the average recovery of the-whole year, whichever was more; and (iii) the figure of recovery, if there was a digit in the second decimal place, it was rounded off by increasing the first decimal place by one in all cases. In support of the assertion of the petitioner that the price at which sugar produced was sold by the petitioner factory during the relevant year was totally ignored, a statement was annexed to the petition (Annexure 'D') indicating the rates of sugar from 1967-68 to 1969-70 which disclosed that the price of sugar had suffered a fall year after year. No material was put forward by the Union of India to controvert this fact.

7. In deciding the question whether the requirements of Sub-clause (d) of Clause (3) (i) of the Sugarcane (Control) Order, 1966, have been ignored in fixing the basic price of sugarcane for the year 1970-71 it may be pointed out that since 1967-68 sixty per cent of the sugar produced by the sugar factories was requisitioned by the Government for distribution through controlled channels at a fixed price determined from time to time and was known as 'levy sugar'. The balance of forty per cent, which was popularly referred to as 'free sugar', was sold by the factories at any price hi the open market With regard to the free sugar the contention of the petitioner was that there was a downward trend in the price in the open market and the material furnished by the petitioner remained unchallenged. However, the basic price of sugarcane remained unchanged during this period. No explanation has been furnished by the Union of India why the basic price of sugarcane remained unchanged in spite of the fact that the price of sugar suffered a decline. The price at which sugar produced from sugarcane was sold by the producer of the sugar, one of the essential considerations in fixing the minimum price of sugarcane, was obviously ignored in fixing the basic price of sugarcane for the year 1970-71 rendering the notification invalid.

8. The minimum price of Rs. 7.57 per quintal of sugarcane purchased by the petitioner factory indicates that the recovery of sugar was taken at 9.7 per cent. This is deducible from the Circular Letter referred to earlier according to which the basic minimum price of 7.37 was linked to a recovery of 9.4 per cent or below for every 0.1 per cent increase in recovery above 9.4 per cent. A premium of 6.6 paise was added to the minimum price. The procedure adopted by the Union of India was disclosed in the counter-affidavit. It was stated therein that the actual recovery of the petitioner's factory during the preceding year was 9.6 per cent. taking into account the recovery of the optimum period, that is, December to March of that year. The question for consideration is whether the Central Government could fix the price of sugarcane on the basis of the recovery made during the preceding year and that too by taking into consideration the option (optimum?) recovery for a period of the season only. It was contended on behalf of the respondents that sub-clause (e) of Clause (3) (i) of the Sugarcane (Control) Order, 1966 envisaged that the recovery of sugar from sugarcane for the entire season should be taken into consideration and that too for the year for which the sugarcane price is fixed. It was not open to the Central Government to take into consideration the recovery of a limited period or for any preceding year in fixing the price of sugar-cane. On a plain reading of the language of sub-clause (e) it is clear that there is no warrant for the stand taken by the Union of India that it was open to it to take into consideration the optimum recovery during the preceding year or the average recovery of the whole preceding year whichever was higher. A careful reading of other sub- Clauses of Clause (3) of the Sugarcane (Control) Order, 1966 indicates that the factors to be taken into consideration have to be for the entire relevant year and not either for a period of a year or for any preceding year. ft cannot be contended that with regard to sub-clause (a) the cost of production of a part of year or of any preceding year would be relevant. Similarly the return to the growers or the availability to the consumers at a fair price could not be in respect of a part of a year or of any other year except the year in question for which the price of sugarcane has to be fixed. It is admitted that the sucrose content of the sugarcane varies from period to period. It is maximum during the period of December to March. There could be no legal justification to take sucrose contents of the optimum period as the basis for fixing the price of sugarcane. It does not flow from the language of the Sugarcane (Control) Order, 1966 and would be unfair and unjust.

9. The procedure adopted by the Central Government was sought to be justified on the ground that a number of concessions were allowed to the factories concerned in the shape of rebate from excise duty etc. It was also pointed out that it was not possible to ascertain the recovery of sugar from every quintal of sugarcane supplied and, therefore, if recovery from sugarcane supplied during a part of the season was taken as a basis for fixing the price of the sugarcane, there was sufficient compliance with the requirement of sub-clause (e) of Clause (3) (i) of the Control Order. We may point out that under the Control Order the Central Government has power to ask for the relevant data from the Sugar factories with regard to the recovery of sugar. There could, therefore, be no difficulty for the.Central Government in obtaining the necessary information regarding the average recovery of sugar from the sugar-cane during the entire crushing season of the factory and take that into consideration to fixing the price of sugar-cane supplied to the factory. It is, therefore, obvious that the Central Government failed to take into consideration the relevant factors as laid down in Sub-clauses (d) and (e) of Clause (3) (i) of the Control Order, and the Notification dated 12th November, 1970, fixing the price of sugarcane payable by the petitioner could not be legally sustained.

10. The learned counsel, appearing for the Co-operative Cane Development Union in a connected appeal, contended that the question whether certain sub-clauses of Clause (3) (i) of the Sugarcane (Control) Order 1966 were taken into consideration or whether wrong principles were applied in fixing the price of the sugarcane was a matter which was not justiciable. This argument was based on the reasoning that the Central Government had full authority under the law to fix the price of sugarcane and the only requirement enjoined by Clause (3) (i) was that the price would be fixed 'having regard to' certain factors mentioned in sub- Clauses (a) to (e) and that it was not incumbent on the Central Government to strictly adhere to the various factors set out in Clause (3) before fixing the price of sugar-cane. Reliance was sought to be placed on the case of Mysore State Electricity Board v. Bangalore Woollen Cotton and Silk Mills Ltd. : AIR1963SC1128 .

In that case one of the questions raised was whether the dispute relating to the revised rates for the supply of electric energy between the Textile Mills and the Electricity Board was liable to be referred to arbitration under Section 76 of the Electricity (Supply) Act, 1948. The dispute related to a period before the Electricity Board was constituted on 30-9-1957 under Section 5 of the Act. Section 49 of the Act, on which reliance was placed by the Textile Mills, also came into force on 30-9-1957. The Court came to the conclusion that the revision of rates which was made by the State Government in 1953-56 rested either on contract OF on the unilateral action of the State Government and was outside the 1948 Act and was not referable to any provision thereof. Dealing with the provisions of section 49 which gave a right to the Board to supply electricity to any person not being a licensee upon such terms and conditions as the Board may from time to time fix having regard to the nature and geographical position of the supply and the purpose for which it is required, the Court observed that it was unable to agree with the contention that the consumers may raise a dispute with regard to terms and conditions and on such a dispute being raised it shall be determined by arbitration as required by Section 76(1) of the Act. It was pointed out that there was no provision in the Act which regulated theBoard in the matter of the charges which it may fix for the supply of electricity. In the absence of any such provision the Court held that the expression 'having regard to the nature and geographical position of the supply and the purpose for which it is required' did not contemplate that a consumer could raise a dispute as against the Board on the footing that the Board did not pay the due regard to the nature and geographical position of the supply and purposes for which it was required. These observations have to be read in the background of the findings that the dispute was not referable to any provisions of Electricity (Supply) Act, 1948, and related to a period when neither the Electricity Board had been constituted nor section 49 of the Act had come into force and further that there was no provision in the Act which regulated the Board in the matter of fixing the rates for supply of electric energy. This case is, therefore, no authority for the proposition that when under a law an authority is required to come to an 6bjective decision having regard to certain factors and principles, that decision of the authority could not be challenged even if it ignored to take into consideration the basic factors or applied wrong principles in coming to a decision.

11. The implication of the expression 'have regard to' was laid down in Ryots of Garabandho v. Zamindar of Parlakimedi thus:

'The view taken by the majority of the Collective Board of Revenue in making the order dated 19th October, 1936, which is now complained of, is that the requirement to 'have regard to' the provisions in question has no more definite or technical meaning than that of ordinary usage, and only requires that these provisions must be taken into consideration.'

Viscount Simon, L. C., proceeded to observe 'the expression 'have regard to' or expressions very close to this, are scattered throughout this Act, but the exact force of each phrase must be considered in relation to its context and to its own subject-matter. Any general interpretation of such a phrase is dangerous and unnecessary,.....'

12. We find it difficult to accept the contention that, on the principle laid down in the case of Ryots of Garabhandho (supra), the Central Government would have normally to take the various provisions of Clause (3) (i) into account but was not strictly bound to do so. The Privy Council case-appears to be of no avail for the interpretation of the words 'having regard to' in the context in which they have been used in Clause (3) of the Sugarcane (Control) Order, 1966. The effect of the words 'having regard to' will be different in different contexts. The words have life and meaning infused in them through the context in which they are used. In the context in which it has been used in the Control Order it was incumbent on the Central Government totake into consideration the various factors enumerated in Clause (3) before coming to a decision with regard to the price of the sugarcane supplied to the factories. It could not ignore any of those factors or take into consideration a factor not mentioned in Clause (3). For example, the Central Government could not totally ignore the price at which free sugar was sold in the market during the relevant year or the sucrose contents of the sugarcane.

13. In this connection reference may be made to the case of M/s. Diwan Sugar and General Mills (P.) Ltd. v. Union of India : AIR1959SC626 . In that case the legality of the notification issued by the Government of India fixing the ex-factory price of sugar produced in Punjab, U. P. and North Bihar was challenged. Under Clause 5 of the Sugar (Control) Order, 1955 the Central Government was empowered to fix the price or the maximum price at which any sugar might be sold or delivered, and different prices might be fixed for different types of factories or different types of sugar. Such price or maximum price had to be fixed with due regard to various factors mentioned in that Clause. One of the contentions raised was that the impugned notification was invalid as it was unreasonable restriction to the petitioner's right to carry on trade under Article 19(1)(g) of the Constitution. This argument was based on three factors: (i) factories were compelled to sell sugar below the cost of production; (ii) the price fixed was arbitrary; and (iii) there was no safeguard against the abuse of power. On the materials placed on the record the Court came to the conclusion that the prices fixed by the Government could in no circumstance be said to have been proved below the cost of production. The Court also camt to the conclusion that all relevant factors prescribed under Clause 5 of the Order were apparently taken into consideration and the prices fixed themselves showed that they were not arbitrary. Dealing with the question that there was no safeguard against the abuse of power, the Court observed:--

'So long as the Central Government exercises its power in the manner provided by the Act and the Order and this is what it appears to have done -- it cannot be said that any further safeguard is necesary in the form of an appeal or otherwise. The safeguards are to be found in Clause 5 itself, namely, that the Central Government must give consideration to the relevant factors mentioned therein before fixing the price, and thus these factors are a check on the power of the Central Government if it it ever-minded to abuse the power.'

These observations clearly imply that the power has to be exercised in the manner provided by the Act and the Order and if relevant factors are ignored or extraneous factors are taken into consideration, the exercise of power would be invalid. Various safeguards have been introduced inthe Control Order in the interest of all the parties concerned. A producer is, therefore, entitled to challenge the validity of the notification on the ground of non-compliance of the conditions subject to which the power could be exercised. In the case in hand the Central Government admittedly did not take into consideration the price at which sugar produced was sold by the producer during the relevant year and the recovery of sugar from sugarcane for the optimum period alone was taken into consideration and that too of the preceding year. In these circumstances the fixation of minimum price of sugarcane to be paid by the petitioner was invalid and could not be legally enforced.

14. The learned Single Judge did not consider it advisable to quash the notification on the ground that such an order would create chaos and neither the sugar factories nor the sugarcane growers would know where they stand as regards the price of the sugarcane supplied. We are, however, of the opinion that no such difficulty would arise if the notification fixing the minimum price to be paid by the petitioner is quashed and the Central Government is directed to fix the price.

15. We accordingly quash the notification of the Government of India dated 12th November, 1970, in respect of the petitioner's factory and direct that the minimum price of sugarcane supplied to the petitioner's factory during the year 1970-71 be re-fixed in accordance with law.

16. The direction issued by the learned Single Judge that if on refixation of the price the petitioner is entitled to a refund of any portion of the amount deposited in pursuance of the interim order of this Court it shall be refunded to the petitioner on a certificate of the Cane Commissioner, but in case the petitioner is required to pay further sum that would be payable to the sellers of the sugarcane ac-cording to the refixed price of the quantity supplied by them is confirmed.

17. The appeal has no merit and is accordingly dismissed with costs.


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