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The Pelhi Cloth and General Mills Co. Ltd. Vs. the Union of India and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtDelhi High Court
Decided On
Case NumberCivil Writ Appeal No. 95 of 1971
Judge
Reported inAIR1982Delhi29; ILR1982Delhi507
ActsEssential Commodities Act, 1955 - Sections 3
AppellantThe Pelhi Cloth and General Mills Co. Ltd.
RespondentThe Union of India and ors.
Advocates: Shanti Bhushan,; Ashok Gupta,; D.N. Mishra,;
Cases ReferredRyots of Garabandho v. Zamindar of Parlakimadi
Excerpt:
essential commodities act, 1955 - section 3--the sugarcane price can be fixed either in respect of factories in an area or in respect of dual factories ;in the instant case, the petitioner has challenged the notification of the respondent fixing the minimum sugarcane price for two of the petitioner' factories in respect of the season 1970-71. allowing the writ petition, ; 1. clause 3 of the sugarcane (control) order, 1966 makes it clear that the figures of recovery could not be restricted to the peak period. the aforesaid clause permits the central government to fix sugarcane prices from time to time and it is evident that the prices are to be fixed at the beginning. the central government may choose to fix the price for the whole season or for a part of the season. the government may.....b.n. kirpal, j.(1) the petitioner in this writ. petition is seeking to challenge the notification dated 12th november, 1970 whereby the minimum sugarcane price for two of the petitioner's factories, namely. daurala sugar works and maw- ana sugar works was fixed in respect of the season 1970-71. (2) the aforesaid two sugar factories owned by the petitioner are situated in district meerut in uttar pradesh. under the essential commodities act, 1955 the central government has been regulating the price, distribution and movement of sugar and has also been fixing the price of sugarcane. under saction 3 of the essefitial commoditi.'s act, 1955 the central government issued the sugarcane (control) order, 1966, which order repealed an earlier similar order of 1955. in this writ petition we are.....
Judgment:

B.N. Kirpal, J.

(1) The petitioner in this writ. petition is seeking to challenge the Notification dated 12th November, 1970 whereby the minimum sugarcane price for two of the petitioner's factories, namely. Daurala Sugar Works and Maw- ana Sugar Works was fixed in respect of the season 1970-71.

(2) The aforesaid two sugar factories owned by the petitioner are situated in District Meerut in Uttar Pradesh. Under the Essential Commodities Act, 1955 the Central Government has been regulating the price, distribution and movement of sugar and has also been fixing the price of sugarcane. Under saction 3 of the Essefitial Commoditi.'s Act, 1955 the Central Government issued the Sugarcane (Control) Order, 1966, which Order repealed an earlier similar Order of 1955. In this writ petition we are concerned with clause 3 of the said Order. The said clause enable the Central Govt. to fix minimum price of sugarcane payable by a producer of sugar. The relevant portion of the said clause, namely, clause 3(1) reads as under :--

'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 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 title 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 sugarcane ; 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.'

In exercise of the powers conferred by aforesaid clause 3 the Central Government issued Notification dated 12th November, 1970. By this Notification sugarcane prices were fixed in respect of the year 1970-71 (1st October, 1970 to 30th . September, 1971). Different prices were fixed by this Notification in respect of different producers of sugar. The prices of sugarcane which were fixed in respect of Daurala Sugar Works and Mawana Sugar Works were at Rs. 8.03 and 7.96 per quintal respectively*

(3) The aforesaid fixation of prices of sugarcane is sought to be challenged in the present petition under Article 266 of the Constitution of India. According to the petition the Government fixed the prices in the following manner :

'(A)A basic price is fixed by taking into consideration various factors referred to in clause 3(1) of the said Order. In the present case the basic price was of 'Rs. 7.37per quintal. (b) The aforesaid base price which is uniform for the whole of India is based on the recovery being 9.4 per cent. The aforesaid base price of 7.37 per quintal is then varied from factory to factory. The variation takes place by taking into account the recovery of a selected period of the previous season in respect of each manufacturing unit. The selected period is from 1st December to 31st March. I For the. purpose of fixing the cane price the Central Govt. gives a premium on the current year's cane price at the rate of 6.6 paise for every increase of O.1% recovery over the ba'sic recovery of 9.4 per cent. This rate of premium has been increased from 5.36 paise to 6.6 paisc this- year. Before me no grievance has been made with regard to this increase. The increase from the basic price has been linked with the recovery. For the purpose of working out the increase in recovery the unit of recovery is taken in terms of O.I and not O.01. In other words the second decimal is not retained by the Government while working out the increase. In addition thereto, the second decimal is rounded off to the next higher first decimal. To give an example, O.01 is rounded off to O.10.'

The aforesaid method of working out the prices for individual units has not been controverter by Union of India. The Union of India has, of course, given its justification for adopting such a method which justification will be gone in to presently.

(4) According to the petitioner there is no warrant for the 'Government taking into consideration the recovery of sugar 'in respect of only a part of the season and, furthermore, the principle of rounding off of the second decimal to the next higher first decimal is also illegal. Another grievance of the petitioner is that in taking the figure of recovery the previous year's figure is- taken into consideration and not the figure of the current year for which the price is fixed. According to the petitioner the correct price of sugarcane payable on the basis of the previous season's recovery should be 7.54 per quintal in the case of Daurala and 7.56 in the case of Mawana. It has been averred that as a result' of such fixation of price Daurala and Mawana factories have been put to a loss of about Rs.. 14.70 lac.s and Rs. 24 lacs respectively.

(5) In the counter-affidavit filed on behalf of Union of India the legal submissions made by the petitioner have been controverter. With regard to the 'two submissions which were made before me on behalf of the petitioner, namely, that for purposes of working out the recovery the entire season should be taken into consideration and not the peak period and that the Second decimal should not be ignored or in any case should not be rounded off to the next higher first decimal, the Central Government has sought to give a justification. With regard to taking the recovery only with respect the prescribed period the Government has stated that this course was adopted as it has the following advantages : (a) As the recovery varies over a long period of time the recovery for the whole season is not a correct criterion for fixation of minimum price 'of sugarcane on quality basis. ' (b) By going on the basis oi prescribed period every year the recovery will not be subject to mainpulation later. (c) This method Would also 'avoid' multiplication in fixation of provisional and final prices. (d) The cultivator will get an incentive to improve upon his previous year's recovery and thereby get advantage in future. (c) Though the overall recovery of sugar may vary from year to year the recovery obtained during a prescribed period every year will be a fair Indication , of the sucrose content- of cane from year to year. (f) The factories would .not. try .to unduly prolong the crushing season .to the detriment of the growers' interest as a prolonged crushing season decreases the recovery. (g) The sugar factories are not at their maximum efficiency during the earlier and the later parts of the season and the working results during these parts do not reflect the correct position. The roundings off has also been sought to be justified. It has been alleged that most of the sugar factories indian are old do not run with optimum efficiency and even otherwise there is considerable scope for improvement in efficiency. It is 6 HCD/83-12. alleged that there is scope for manipulation by unscrupulous sugar manufacturers. The contention of the Government is that it is to meet such contingencies that it was decided to round off the recoveries obtained by the factories at the second place of decimal to the next point in the first place of decimal.

(6) Before me the contention of the learned counsel for the petitioner has been that while fixing the prices the Government should have taken into consideration the recovery for the entire year and not in respect of the peak or the optimum period. In this connection it was also sought to be argued in the beginning that the figures of recovery should only be with regard to the current year and prices cannot be fixed on the basis of recovery figures of the previous year. The other main contention which has been urged before me was with regard to rounding off to the next higher first decimal place. According to the petitioner the loss which it has suffered on account of wrong rounding off with regard to Daurala and Mawana m respect of the year 1970-71 is O.90 lac and 2.40 lacs respectively. The estimated loss due to taking the peak recovery for the year 1969-70 into consideration, instead of the recovery of the entire season, is alleged to be to the tune of R&.13.80 lacs in respect of Daurala and 21.60 lacs in the case of Mawana. The third contention which was raised was that the, prices could only be fixed area-wise and different prices could not be fixed for different factories. With regard to the last contentio'n the learned counsel fairly conceded that this point has been. decided against him in the case of M/s. Shervani Sugar Syndicate Ltd. v. Union of India and another, : AIR1979All394 and he would not like to take much time of this Court in reappraising the correctness of that decision on this point.

(7) With regard to the other two questions which have been urged before me, strong reliance has been placed by the learned counsel on the decisions of the Allahabad High Court. In respect of this very year, namely, 1970-71 price in respect of a factory owned by Shervani Sugar Syndicate had also been fixed by the impugned Notification. The fixation of the said price was challenged. A single Judge of the Allahabad High Court in the judgment reported as Ms. Shevani Sugar Syndicate (Private) Ltd. v. The Union of India and another, : AIR1972All71 allowed the said writ petition. It was held by the learned Judge that taking recovery of sugar from sugarcane supplied during the optimum period in the crushing season as an index of recovery of sugar from sugarcane supplied throughout the season was not in consonance with the provisions of clause 3 of the 1966 Order. It was further held that, in fixation of price of sugarcane, the said 1966 Order did not permit data of the previous year, relating to recovery of sugar and other items, to be taken into consideration for fixing the price of sugarcane supplied in the current year. The learned single Judge observed that the prices undoubtedly have to be fixed at the beginning of the crushing season. It was not possible at that time to have the future data available but, according to the learned single Judge, this could not justify in the Government departing from the expression provision of law and that there were ways of complying with the letter of law. The example which the single Judge gave was that the Government could adopt the principle of deferred payment, which had once been adopted earlier. The aforesaid decision was upheld in appeal having been filed by the Union of. India, and that is the second case relied upon by the learned counsel which is reported as The Union of India v. M[s. Shervani Sugar Syndicate and another, : AIR1973All190 . The decision of the learned single Judge was affirmed in its entirety. It was further observed that on a correct construction of clause 3 of the 1966 Order the effect of the words 'having regard to' will be different in different contexts. It was' observed by the Division Bench in this connection as follows :

'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 to take 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 sucorse contents or the sugarcane.'

(8) Another decision on which reliance has been placed also of Shervani Sugar Syndicate is reported as M/s. Shervani Sugar Syndicate Limited, Allahabad v. Union of India and another : AIR1979All394 . A Division Bench of the Allahabad High Court reaffirmed its earlier decision in the case of Shervani Sugar Mills (supra). It was reiterated that the cost of production of sugarcane and recovery in: an earlier year could not be taken into consideration while fixing the price. It was further observed that as the factors setout in sub-clauses (a) to (d) of clause 3(1) of the 1966 Order admittedly relate to the whole year there appeared to be no reasonable basis for confining the question of recovery of sugar only for a particular period. The said decision upheld the right of the Government to fix prices factory wise but the Court did not accept the principle of rounding off which had been adopted by the Government with regard to the figure of sugar recovery. In this connection it was observed that there was no provision of law or principle of accounting which may justify the device of rounding off the figure of recovery which involved considerable financial burden on the producer and also unequally distribute the gain among different cultivators.

(9) Before dealing with the aforesaid decisions and the cotentions of the learned counsel it will be proper to note the decisions relied upon by Shri Chandrasekharan. According to the learned, counsel for the Union of India the object of the impugned order is to benefit the sugarcane growers. Keeping that Object in view the Govt. can, according to Shri Chandrasekhran, take into consideration favorable factors qua the sugarcane growers. One such favorable factor is to take into consideration the sugar recovery only during the optimum or the peak period of 1&t; December to 31st March instead of the entire sugar season. Shri Chandrasekhran has also contended that there is no illegality in the rounding off of the sugar recovery percentage. The two decisions which are relied upon by him are reported as Standard Refinery & Distillery Ltd. v. Union of India, 2nd 1976 Pat 669 and M/s. Kalooram Govindram v. The Union of India and another, : AIR1977MP28 . Both the High Courts have dissented with the aforesaid judgments in : AIR1972All71 and : AIR1973All190 . In the Patna case, with regard to the question as to whether the particulars of sugar recovery only for a fixed period to be taken or not, it was observed as follows

'learned counsel contended that it is accepted in the counter-affidavit that the recovery factor for a particular period which is a peak period and not the whole season has been taken into account. This he contends, cannot be done. Here again, I find it difficult to accept the contention of the learned counsel in view of the 'wide language in which Clause 3(l)(e) is couched. If the intent was that the recovery factor for the whole year should be ncc?:'.^ii11y taken into consideration, it could have been said so in Clause 3. It could have been easily said so in express words. But, this has not been done. It, thereforee, leaves it in the discretion of the Central Government to take even a shorter period and not the whole season in into consideration while considering the recovery factor. Of course, the discretion so vested cannot be exercised capriciously or in an arbitrary manner.'

6 HCD/82 13. With regard to the argument which was raised challenging the principle of rounding off it was observed in the Patna case as follows :

'It was next urged that there was no justification for rounding off the recovery figure. What has been actually done has been explained in paragraph 8 of the counter-affidavit. It is stated that the figure of recovery obtained by a sugar factory is rounded off from the second place of decimal, e.g., the recovery of 9.01 is rounded off to O.I per cent. This is done to provide for the larger variation in efficiency at which factories work. This rounding off procedure has been uniformly applied for all the factories. Rounding off is a common method lor the convenience of calculation. As long as this method has been uniformly applied, and it is not asserted that it has not been uniformly applied, there is no infirmity in fixing the price of sugarcane by taking into considerations a rounded off figure.'

The judgment of the Madhya Pradesh High Court in the case of Kalooram Govindram (supra) is similar to the decision in the Patna case. The Madhya Pradesh High Court has also , from the view taken by the Allahabad High Court in the case of Shervani Sugar Syndicate (supra) in the year 1973. Another case relied upon by Shri Chandrasekhran is that of M)s. Diwan Sugar and General Mills (Private) Ltd. and others v. The Union of India, (1959) suppl. (2) S.C.R. 123. Relying upon this decision it has been contended by him that in working out the sugarcane prices it was permissible for the Government to rely upon the statistics available in respect of the previous season. As I read clause 3 of the said Order it appears to me that the contention of the petitioner, namely, that the figures of recovery could not be restricted to the peak period and that the said figures could not be rounded off are well founded. I am, however, unable to agree with the submission, and to this extent I differ with the view expressed by the learned Judges of the Allahabad High Court, that it is not possible to take into consideration the particulars with regard to recovery etc. of an earlier year.

(10) Clause 3 of the said Order permits the Central (Government to fix sugarcane prices from time to time. It is evident that the prices are 'to be fixed at the begining. The Central Government may choose to fix the prices for the whole season or, from time to time, for part of the season. There can be no dispute that, whether the prices are fixed for the whole season or for part of the season, the prices have to be fixed at the beginnipg. These prices have to be fixed, as is evident from the bare perusal of the said clause, by 'having regard' to the five factors (a) to (e) mentioned in the said clause. The expression having regard to' has been subject to judicial pronouncements. Healing with an analogous provision contained in the Sugarcane (Coatrol) Order, 1966 which used the expression 'having regard to', the Supreme Court, after noting that Privy Council decision in Ryots of Garabandho v. Zamindar of Parlakimadi , observed in Saraswati Industrial Syndicate Ltd. etc. v. Union of India, : [1975]1SCR956 as follows: The expression 'have regard to' only obliges the Government to consider as relevant data material to which it must have regard.' It is. evident that these factors cannot be ignored by. the Government while fixing the prices. It may be that after taking into account the aforesaid factors the Government may fix a price, which may be higher or lower than what it will work out by strictly following or applying the factors mentioned therein. In other words, the Government is not bound to fix the price of sugarcane by rigidly following the particulars with regard to factors (a) to (e) of clause 3(1). These particulars are relevant and regard must be had of them but the 6 HCD/82 14. Government is entitled to fix a price which, may work out to be different than what would work out by following these factors alone.

(11) The factors mentioned in clauses (.a) to (e) have to be given due regard at the time when the prices arc fixed. .It is obvious that no 'particulars with regard to these factors, can possibly be available with regard to the season for which the prices are being fixed.' ' The only particulars which can be available are for the earlier years. As already observed the Government cannot fix a price by disregarding clauses (a) to (e). If I was to accept the contention of the petitioner, that clauses (a) to (e) referred to the current year, then it will be impossible for the Government to have regard to them because the said particulars cannot possibly be available at the beginning of the season or at the time when the Government is fixing the price. Fixing the price before the sale of sugarcane starts necessarily means that there has to be a certain amount of estimation or guess work involved. That is why in clause 3 the words 'having regard' have been used. The Government will have regard to the figures of the earlier years of factors mentioned in clauses (a) to (e) and, keeping in view the said figures, fix a price for the future. It is not for the Courts to decide as to what is the manner in which the price is to be fixed or what are the other factors which the Government should take into account, so long as the other factors are relevant. Onething, however, is clear that regard must. be had to the correct figures of the previous year. When exact figures are available with regard to recovery in respect of the previous years there is no justifiable reason as to why the same should be disregarded.

(12) Under clause 3 the sugarcane price can be fixed in respect of factories in an area or, as already held in : AIR1979All394 and a? has been shown in this case. .in respect of individual factories. If the prices of sugarcane arc fixed for the individual factories then reference to sub-clauses (a) to (e) of 0151^0 3 must be with regard to that individual factory in respect of which the price has been fixed.. In other words, for example, regard must be had to the recovery of sugar from sugarcane of the factory in respect of which the price is being fixed. The Government cannot, while fixing the price of sugarcane with regard to a factory under clause 3, have regard to the percentage of recovery of sugar of another factory. The price can be fixed from time to time. If the price is fixed lor the whole year, then in fixing that price, as I read clause 3, the Government must take the corresponding figures of recovery for the earlier whole year. If the price is fixed only for two months at a time, the Government would then be entitled to have regard to the figures of recovery of sugar of the corresponding period of the earlier year. It cannot be that the price is fixed in respect of the whole year but the particulars on which the price is fixed, namely, the. recovery of sugar are restricted to the optimum of the peak period alone. The reading of sub-clause (e) does not show that the Government is permitted to have regard to a part recovery of sugar from sugarcane. The plain meaning of the words 'recovery of sugar from sugarcane' must mean the entire recovery of the sugar from sugarcane. The recovery of sugar is worked out from the quantity of sugarcane which is purchased and crushed by a producer. If the production of only a part of the season is taken into consideration it would amount to taking into consideration only a part of the recovery of sugar from sugarcane which has been crushed by the producer.

(13) For the aforesaid reasons, and also for the reasons mentioned in the aforesaid Allahabad judgments, I am of the opinion that the Central Government was not justified in having regard to the recovery of sugar only for the optimum period though the Government was entitled to take into consideration the figures of the year 1969-70. but it should have taken into consideration the figures for the entire season and not a part of the season.

(14) With regard to rounding off also I am in full agreement with the observations of the learned Judges of the Allahabad High Court in : AIR1979All394 . I would further like to add that the Government itself has fixed the price of sugarcane by going up to second decimal point. For example the price of sugarcane in respect of Daurala has been fixed at Rs. 8.03 per quintal. If second decimal point is relevant for the purpose of determining the price to be paid by the producer the second decimal point cannot become irrelevant while working out that price. It is admitted that there would be a difference in the price finally worked out by rounding off the figure of the recovery from sugarcane in the manner in which it has been done in the present case. Clause' 3 postulates, as already observed, having regard to the correct figures of the factors mentioned in clauses (a) to (e). The exact figures of the said factors, if available, cann)ot be unilaterally altered. There is no warrant for rounding off the figures which are available with regard to any of the said factors. In any event, even it it be assumed that the Government was entitled to apply the principle of rounding off, which principle is not discernible from the said 1966 order, it must follow the priniciple as universally known. A figure is rounded off to the nearest whole. In the present case the Government has evolved a novel manner of rounding off, namely, a figure of O.11 has been rounded off to 0.20. Ordinarily the principle, as I understand, is that if rounding off is to be adopted it is to the nearest whole figure, in which case a figure of say O.11 would become O.10 and not O.20. In my opinion, thereforee, the manner of rounding off which has been adopted is clearly arbitrary. In my opinion the view of the Allahabad High Court with regard to rounding off and the figure? of the recovery to be of the entire season is correct. With respect I am unable to subscribe to the view contained in the Patna and Madhya Pradesh cases.

(15) Before parting, I cannot help but observe that in the present case the Government, while fixing the price of individual units, has varied the basic price by having regard to the recovery of sugar which has been made by the different units. In other words they have bad regard to sub-clause (e) of clause 3(1) of the said Order. Mr, Chandrasekhran is unable to state, in the absence of pleadings, as to whether in working out the prices mentioned in the impugned Notification of 12th November, 1970 regard was had, with reference to individual manufacturing units. to sub-clause (a) to (d)'of clause 3. It, however, appears that the said factors (a) to (d) were taken into consideration only while .working out the base price of 7.37 per quintal but thereafter, while determining the prices for individual units, regard was had only to sub-clause (c)' of clause 3(1) and the other clauses (a) to (d) were ignored. As no such contention has bees raised, thereforee no direction is being issued by me in this regard.

(16) For the aforesaid reasons the petitioner is entitled to succeed in this petition.

(17) The next question which arises is as to what directions should be issued. Along with the petition an application for stay had also been filed. An interim order dated 9th February, 1971 was passed with the cansent of the parties. The effect of the said order was that the petitioner was permitted to purchase sugarcane at Rs. 7.56 per quintal in case of Mawana Sugar Works and Rs. 7.54 per quintal in case of Daurala Sugar Works. This was, however, subject to the condition that the petitioner was to deposit the difference of the amount between the notified price and the purchase price in a separate bank account. It appears that a sum of Rs. 10,01,1071- and Rs. 6,78,3861- was deposited in the State Bank of India at Mawana and Daurala respectively. By order dated 15th October, 1971 the petitioner was permitted to withdraw the said amounts on its furnishing bank guarantee for equal amounts to the satisfaction of the Registrar of this Court. Two bank guarantees were filed and accepted and thereafter the aforesaid amounts have been released to the petitioner.

(18) For the reasons contained hereinabove I quash the fixation of the price of sugarcane to be purchased by the petitioner's factories, namely, Daurala Sugar Works and Mawana Sugar Works as contained in the Notification dated 12th November, 1970 but direct the Central Government to re-fix the price in the light of the observations made in this- judgment and till the said price is re-fixed, the petitioner is directed to keep the bank guarantees alive. In order to enable the Government to determine the price the petitioner should within 15 days from today. furnish to the Government the requisite facts and figures, if not already furnished and the Government should, within four weeks thereafter, re-fix the price of sugarcane. On such re-fixation of the price, if any amount in excess of what has already been paid by the petitioner has to be paid the same shall be disbursed lo the sugarcane growers and the bank guarantees for the balance amount would thereafter stand discharged. It is clarified that if the price is not re-fixed in terms of this decision and' within the period prescribed, the effect would be that the bank guarantees would stand automatically discharged after a period of six weeks from today. The petitioner would be entitled to costs. Counsel's fee. Rs. 5001-.


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