1. The petitioner is the owner of a sugar factory at Mohidpur Road district Ujjain, known as Seth Govindram Sugar Mills. By this petition under Article 226 of the Constitution, the petitioner seeks quashing of a Notification of the Central Government, dated 12th November 1970, fixing the minimum price of sugarcane for the year 1970-71 at the rate of Rs. 7.77 per quintal for the petitioner's factory.
2. The impugned Notification was issued by the Central Government under Clause 3 of the Sugarcane (Control) Order, 1966, made under Section 3 of the Essential Commodities Act, 1955. Clause 3 of the Order in so far as relevant reads as follows:--
'3. Minimum price of sugarcane payable by producer of sugar.-- (1) The Central Government may, after consultation with such authorities, bodies or associations as it may deem fit, by notification in the Official Gazette, from time to time, fix the minimum price of sugarcane 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 sugar-cane;
(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.-- (1) Different prices may be fixed for different areas or different qualities or varieties of sugarcane.
3. For the year 1970-71, the Central Government fixed the basic minimum price of sugarcane at Rs. 7.37 per quintal linking it to the recovery of sugar from sugarcane at 9.4% or less. This was also the basic minimum price for the years 1967-68, 1968-69 and 1969-70. The Central Government also allowed a premium at the rate of 6.6 paise for every increase of 0.1% of recovery over the basic recovery of 9.4%. For fixing the minimum price payable by a factory, the recovery of sugar taken into account is for the period from 1st December to 31st March of the previous year. As the recovery during this period in 1969-70 so far as the petitioner's factory is concerned was 9.96%, the minimum price for the factory for 1970-71 was fixed at Rs. 7.77 per quintal. The petitioner's grievance is two-fold. First that in fixing the minimum price the Central Government is not entitled to take into account the recovery of the previous year and that it must take into account the recovery of the year for which the price is fixed. The second grievance of the petitioner is that the recovery should be taken not of a part of the year but of the entire year. It is not disputed that the overall recovery of sugar from sugarcane used in the petitioner's factory was 9.59% during 1969-70 and 9.30% during 1970-71. If these figures are taken into account In fixing the minimum price for sugarcane purchased by the petitioner's factory during 1970-71, the minimum price would be less than Rs. 7.77 fixed by the Central Government under the impugned Notification.
4. The Central Government's reply to the contention raised by the petitioner is that as the minimum price of sugarcane has to be fixed before the commencement of the crushing season, the minimum price is fixed on the basis of recovery of sugar obtained by sugar factories during 1st December to 31st March in the preceding season. For selecting the period from 1st December to 31st March for finding out the recovery of sugar, the reasons given are that this is the maturity period of sugarcane when the yield of sugar is maximum and the utilisation of sugarcane before the maturity of the crop and after the maturity period had passed is not so economical and beneficial as during the maturity period. During the hot months the crop dries up and loses in weight as well as in sucrose content. The interest of the sugarcane growers as well as of the factory demands that sugarcane should be ultilised when it is mature. The crushing of sugarcane when it is not sufficiently mature and after the maturity period is neither in the interest of the growers nor of the factory. The sugarcane growers being mostly small growers are in vulnerable position as compared to the organised sugar industry. Fixation of minimum sugarcane prices on the basis of recovery during the period from December to March is necessary to discourage the sugar factories to unnecessarily prolong their crushing season which will result in low recovery and undue loss to the sugarcane growers.
5. The matters which the Central Government should have regard to in fixing the minimum price of sugar-cane are contained in Sub-clauses (a) to (e) of Clause 3 (1) of the Sugarcane (Control) Order. The recovery of sugar from sugarcane is one such matter which is mentioned in Sub-clause (e). The sub-clause is, however, silent whether the recovery of sugar from sugarcane which the Central Government must have regard to should be of the year for which the minimum price of sugarcane is to be fixed or for any earlier year. It is also silent on the point whether the recovery which is taken into account should be of the entire year or for any period of the year. The argument of the learned counsel for the petitioner that Clause 3 impliedly refers to the recovery for the year for which the price is fixed does not appear to us to be sound. The minimum price for sugarcane has to be fixed before the crushing season starts. At that time, it would be impossible to find out the recovery of sugar from sugarcane for that year. In fixing the minimum price, therefore, regard must be had to the recovery of sugar in the previous year. If the Central Government is required to have regard to the recovery for the year for which the price is to be fixed, it would be impossible for it to fix the price of sugarcane before the expiry of the crushing season. It cannot be held that Clause 3 prescribes a condition which makes it impossible to fix the minimum price for sugarcane at the start of the crushing season. In our opinion, therefore, the Central Government can have regard to the recovery of sugar from sugarcane during the previous year.
6. The second ground that the recovery of sugar from sugarcane which the Central Government should have regard to must be the recovery for an entire year and not for a part of the year appears to us to be equally unsubstantial. As earlier stated by us, Clause 3 does not in terms say that the recovery that has to be taken into account must be for the entire year. It is open to the Central Government, therefore, to have regard to the recovery for any particular period during a year if there is some reasonable basis behind it. We have already set out the considerations which have prevailed with the Central Government in selecting the period from December to March for this purpose. The sugarcane before December is not mature and does not give good yield of sugar. Similarly, after March, the yield of sugar from sugarcane drops because of heat. The best period for crushing of sugar-cane from the point of view of yield of sugar is from December to March. The fixation of price on the basis of recovery from December to March will discourage the factory in unnecessarily prolonging the crushing season, will result in maximum production and will avoid undue loss to the sugarcane growers. In our opinion, these considerations which have weighed with the Central Government in selecting the period from December to March cannot be said to be irrelevant or unreasonable and, as Clause 3 (1) (e) of the Order does not specifically lay down that recovery should be taken for an entire season or year, it cannot be held that the Central Government acted in excess of its authority in failing to have regard to, certain matters which it was required to take into account.
7. The minimum price of sugarcane fixed by the Government has not only to be fair to the factory owner but also to the grower. Sugarcane producing areas are reserved for each factory and in these areas the factory for which reservation is made has a virtual monopoly. The price fixed must ensure to the grower a reasonable return on the cost and labour of production of sugarcane and must also provide him some incentive for not diverting his land for any other crop. The price of sugarcane fixed by the Government is taken into account in fixing the price for levy sugar so that the factory owner may make a reasonable margin of profit judged by average standards of efficiency, on the capital employed by him in the business of manufacturing sugar : [See Section 3(3)(c) of the Essential Commodities Act, 1955 and P.C.S. Mills v. Union of India, AIR 1973 SC 537]. The Supreme Court in the case of S.I. Syndicate Ltd. v. Union of India, AIR 1975 SC 460 at pp. 464, 465, observed that price fixation is more in the nature of a legislative measure and even though based on objective criteria is not open to challenge that a rule of natural justice was not followed; It was further observed that nevertheless the criterion adopted must be reasonable in the sense that there should be a reasonable nexus between the matters taken into account and the exercise of the power of fixation of price. The Supreme Court in the case of Saraswati industrial Syndicate Ltd. (supra) also noticed the want of any averment that the appellants on the price fixed under the Control Order were unable to make a reasonable profit or incurred losses and said that the appellants themselves ignored what appeared to be an important aspect in price fixation so that one was left wondering whether their real complaint was not that they could not profiteer. The case of Saraswati industrial Syndicate Ltd. further shows that when a statutory order empowers the Government to fix the price of a commodity having regard to certain matters, the expression 'having regard to' 'only obliges the Government to consider as relevant data material to which it must have regard.'
8. The petitioner has not alleged in the petition that the market price of sugarcane was lower than the price fixed as minimum price by the Central Government. There is also no averment that the price fixed is so high that the petitioner's factory is unable to make a reasonable profit on the capital employed or that it has to run on loss. In view of the principle stated above and on a proper construction of Clause 3 of the Order, we are unable to hold that the price fixed by the Central Government suffers from any infirmity.
9. The learned counsel for the petitioner has relied upon Union of India v. Shervani Sugar Syndicate, AIR 1973 All 190. In that case, the same notification of the Central Government fixing minimum price of sugarcane was considered by a Division Bench of the Allahabad High Court. The notification was quashed in respect of a factory in Uttar Pradesh on two grounds. The first ground was that in fixing the price of sugarcane the price of sugar sold in open market, which is required to be taken into account under Clause 3 (1) (d) of the Order, was not taken into account. The second ground was that the recovery of sugar for only a period of the season and not for the entire season was taken into account. In the instant case, no grievance has been made by the petitioner that the Government did not take into account the price at which sugar was sold in the open market. As regards the question that the Central Government must have regard to the recovery of sugar for the entire season and not for a period of the season, for the reasons earlier stated, we with great respect are unable to agree with the view of the Allahabad High Court.
10. The petition fails and is dismissed. There shall be no order as to costs. The security amount shall be refunded to the petitioner.