Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 8
CASE NO.:
Appeal (civil) 109\026125 of 1999
PETITIONER:
Pallavi Refractories & Ors. Etc.
RESPONDENT:
M/s. Singareni Collieries Co. Ltd. Etc.
DATE OF JUDGMENT: 04/01/2005
BENCH:
ASHOK BHAN & A.K. MATHUR
JUDGMENT:
J U D G M E N T
With
Civil Appeal No.15 of 2005
(arising out of SLP(C) N. 2783 of 1999)
BHAN, J.
Leave granted in SLP (C) No. 2783 of 1999.
These appeals by grant of special leave
have been filed by the writ petitioners \026 the
appellants herein, against the common order
passed by the High Court of Andhra Pradesh in
a group of writ petitions. The High Court in
the impugned judgment has upheld Clause 10 of
the Price Notification No. 3/96-97 dated
14.3.1997 issued by M/s. Singareni Collieries
Co. Ltd. (hereinafter, for short ’the
respondent’).
Appellants are proprietors of various coal
based small-scale industries who draw ’C’ and
’D’ grade coal from the respondent.
Respondent is a state owned company in which
51% shares are held by the State of Andhra
Pradesh and 49% shares are held by the
Government of India.
Government of India has identified 7
core/priority sector industries. They are: 1)
Exports, 2) Power Utilities, 3) Defence, 4)
Railways (Loco), 5) Fertilizers, 6) Steel
including Sponge Iron and Pig Iron and
7) other metallurgical industries who use
coal/coke for their own use. Core/priority
sector industries alone consume about 90-95%
of the coal produced and left over 5% plus are
supplied to the non-core/unlinked sector
industries to which the appellants belong.
The Government of India has been fixing
the grades and prices of the coal produced in
India in pursuance of clauses 3 and 4 of the
Colliery Control Order, 1945 as continued in
force by Section 16 of the Essential
Commodities Act, 1955. It appears that the
company had accumulated heavy losses and was
reeling under financial problems. The
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 8
Government of India by its notification dated
22.3.1996 issued under clause 3(2) of the
Colliery Control Order, 1945 deregulated the
price and distribution of non-coking coal of
grades ’A’, ’B’ & ’C’. By a further
notification dated 12.3.1997, decontrol was
extended to some other grades of coal as well.
By a communication dated 13.3.1997 addressed
by the Government of India (Ministry of Coal),
it was clarified that the Board of the
respondent company "will henceforth determine
the economic price to be charged for the coal
produced from time to time." Soon thereafter,
the respondent issued the Price Notification
No. 3/96-97 dated 14.3.1997. Clause 10 of the
Price Notification provided that non-
core/unlinked sector industries are required
to pay 20% additional price over and above the
notified prices. Clause 10 reads as follows :
"Any linked customers who are drawing B,
C and D grades of coal are required to
pay 20% additional price over and above
the notified prices."
Being aggrieved with the above stated
clause in the price notification issued by the
respondent, the appellants filed various writ
petitions in the High Court of Andhra Pradesh
challenging the levy of additional price by
the respondent being discriminatory and
violative of Article 14 of the Constitution of
India. According to them, the classification
of linked and unlinked industries for the
purpose of pricing was irrational and gave
rise to hostile discrimination. It was averred
that the respondent has effected a substantial
price variation under the guise of additional
levy and the same amounts to dual pricing. It
was also averred that the price fixed was
arbitrary and excessive.
The respondent in its reply contended that
fixation of price is within its discretion and
coal being not a controlled commodity now, the
respondent could not be precluded from fixing
appropriate prices for its produce including
dual price. It was averred that the limited
grievance of the appellants was against the
alleged discriminatory treatment between core
sector/linked sector industries and other
industries. Having regard to the financial
position of the respondent, having accumulated
loss of more than Rs. 1000 crores and
additional cost of production, there was
nothing wrong in charging higher price from
the non-core/unlinked sector customers leaving
a comfortable profit margin to the respondent.
Dual price has been resorted to by the
respondent after taking into consideration the
policy of the Government of India as well as
the cost of production of the coal of
respective grades. The price was fixed
looking into the various economics of the cost
structure of the production of coal. It was
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 8
averred that sale price was fixed keeping in
view the respondent’s financial capacity,
operational costs and importance of certain
category of industries in larger national
interest. It was denied that there was any
arbitrariness or unreasonableness in the price
structure.
In the High Court the appellants gave up
their challenge to the fixation of the price
being arbitrary or unconscionably high or that
the respondent has fixed the price of 20%
extra according to its whims and fancies
without appraisal of relevant factors. The
only point argued before the High Court was
with regard to dual pricing. According to the
appellants, the non-core/unlinked sector
customers could not be charged more than what
the respondent was charging from the core
sector/linked sector customers.
The High Court dismissed the writ
petitions with costs finding no infirmity in
Clause 10 of the Price Notification. It was
held that Clause 10 of the Price Notification
did not violate Article 14 of the Constitution
of India. It was observed that core
sector/linked sector industries had been given
priority from the beginning so as to ensure
regular supplies of coal to them. This
benefit has been extended to them due to their
intrinsic importance and the role played by
such industries in nation building activities
and the propensities of public utility
possessed by them. Lesser price was charged
from them because of the same considerations.
Core sector industries, besides playing a
vital role in the economy of the country, were
bulk consumers and coal formed a major input
and hence they cannot be compared with the
non-core sector. Any substantial increase in
the price of the coal from them would have a
substantial effect on the cost of finished
products and the cost of services to public in
general. It was observed that any increase in
the price of coal from them shall have a chain
reaction on the budgetary allotments and will
require additional funds. In the case of non-
core sector/unlinked sector industries,
consumption of coal is minimal and the
increase of price of coal from them will not
result in any appreciable increase in the cost
of products manufactured by such industries.
The extent of bulk consumption of coal by core
sector/linked sector industries call for a
special treatment. It cannot be said that by
evolving dual price policy and charging lesser
price from the core/linked sector industries,
the respondent has treated equals as unequals
or that the classification made was not
rational.
Being aggrieved by the dismissal of the
writ petitions by the High Court, the present
appeals have been filed.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 8
The only point argued before us in these
appeals is whether resort to dual price
fixation classifying its customers into core
sector/linked sector and non-core
sector/unlinked sector by the respondent and
charging different prices for coal from such
customers is discriminatory treating the
equals as unequals and, therefore, violative
of Article 14 of the Constitution of India.
Essence of the submissions advanced by
Shri T.N. Rao, learned counsel appearing for
the appellants, is that classification of
core/linked sector industries and non-
core/unlinked sector industries by the
respondent for the purpose of pricing is
irrational and gives rise to hostile discrimination.
The respondent being the State-controlled company
having monopoly business cannot discriminate between
customers at its whims and apply double standards in
charging the price for coal. The classification
carved out between core and non-core industries for
the purpose of price fixation is arbitrary and
unreasonable and an instrumentality of State, even
though running a business activity cannot take the
stand that it has unfettered freedom in charging any
prices it deems fit from any customer. That there
is no reasonable basis for the classification
introduced for the first time and the appellants
cannot be subjected to bear the brunt of much higher
prices. As against this, Shri Altaf Ahmed, learned
senior counsel appearing for the respondents
submitted that fixation of price is within the
discretion of the company and coal being not a
controlled commodity now, the company cannot be
precluded from fixing appropriate price for the
produce including dual price and no customer has any
say in the matter. It was submitted that a mandamus
could not be issued to the respondent to charge
lesser price from the appellants or to charge
uniform price from all the customers. That number
of factors such as financial problems of the
company, operational cost and importance of certain
categories of industries in the larger national
interest can be legitimately taken into account
while fixing the price. That there was enough
justification for adopting dual pricing having
regard to the financial position of the company and
the additional cost of production peculiar to the
respondent, there was nothing wrong in charging a
higher price from non-core/unlinked sector consumers
which would leave a comfortable margin of profit to
the company.
This Court in Union of India v. Cynamide
India Ltd. [AIR 1987 SC 1802] has held that
price fixation is generally a legislative activity.
It may occasionally assume an administrative or
quasi-judicial character when it relates to
acquisition or requisition of goods or property from
individuals and it becomes necessary to fix the
price separately in relation to such individuals.
Such situations may arise when the owner of the
goods is compelled to sell goods to the Government
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 8
or its nominee and the price is to be determined
according to the statutory guidelines laid down by
the Legislature. In such situations, the
determination of price may acquire a quasi judicial
character but, otherwise, price fixation is
generally a legislative activity. After observing
thus, the Court held that price fixation is neither
the function nor the forte of the Court. The Court
is neither concerned with the policy nor with the
rates. But in appropriate proceedings it may
enquire into the question, whether relevant
considerations have gone in and irrelevant
considerations kept out while determining the price.
In case the Legislature has laid down the pricing
policy and prescribed the factors which should guide
the determination of the price then the Court will,
if necessary, enquire into the question whether
policy and factors were present to the mind of the
authorities specifying the price. The assembling of
raw materials and mechanics of price fixation are
the concern of the Executive and it should be left
to the Executive to do so and the Courts would not
revaluate the consideration even if the prices are
demonstrably injurious to some manufacturers and
producers. The Court will however examine if there
is any hostile discrimination. It was observed as
under:-
"We start with the observation, ’Price-
fixation is neither the function nor the forte
of the Court’. We concern ourselves neither
with the policy nor with the rates. But we do
not totally deny ourselves the jurisdiction to
enquire into the question, in appropriate
proceedings, whether relevant considerations
have gone in and irrelevant considerations
kept out of the determination of the price.
For example, if the Legislature has decreed
the pricing policy and prescribed the factors
which should guide the determination of the
price, we will, if necessary, enquire into the
question whether the policy and the factors
are present to the mind of the authorities
specifying the price. But our examination
will stop there. We will go no further. We
will not deluge ourselves with more facts and
figures. The assembling of the raw materials
and the mechanics of price fixation are the
concern of the executive and we leave it to
them. And, we will not revaluate the
considerations even if the prices are
demonstrably injurious to some manufacturers
or producers. The Court will, of course,
examine if there is any hostile
discrimination. That is a different ’cup of
tea’ altogether."
[Emphasis supplied]
A Constitution Bench of this Court in M/s. Shri
SitaRam Sugar Co. Ltd. v. Union of India [AIR 1990
SC 1277] {in paras 57 & 58} has held that in
judicial review the Court is not concerned with the
matters of economic policy. The Court does not
substitute its judgment for that of the Legislature
or its agent as to the matters within the province
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 8
of either. The Legislature while delegating the
powers to its agent may empower the agent to make
findings of fact which are conclusive provided, such
findings satisfy the test of reasonableness. In all
such cases, the judicial enquiry is confined to the
question whether the findings of facts are
reasonably based on evidence and whether such
findings are consistent with the laws of the land.
The Court only examines whether the prices
determined was with due regard to the provisions of
the Statute and whether extraneous matters have been
excluded while making such determination. It was
further observed that price fixation is not within
the province of the Courts. Judicial function in
respect of such matters stands exhausted once it is
found that the authority empowered to fix the price
has reached the conclusion on rational basis.
Seven industries, reference to which has
already been made, have been identified as
core sector consumers. These consumers are
extended inter se priorities in the supply of
coal by granting appropriate linkages. No
linkage is required for Defence, Railways and
for Exports. The coal linkages, as far as
these industries are concerned, are monitored
periodically by the Standing Linkage
Committee. Guidelines for giving linkages are
issued under the provisions of clause 8 of the
Colliery Control Order, 1945 by the Central
Government. The priority given to the linked
customers in the matter of supply of coal are
not under challenge before us. The industries
which do not fall in the core sector are
classified as non-core/unlinked sector
industries.
In the present case admittedly the respondent
is facing heavy financial deficit having accumulated
loss of more than Rs. 1,000 crores. The decontrol
of prices was done with the predominant object to
enable the respondent and other coal companies which
were in red to wriggle out of the financial
predicament to some extent and to derive returns so
as to prevent or minimise further losses. An
industrial company completely held by the Government
cannot be denied the right to keep in view the
consideration of commercial expediency while
formulating its policies in the discharge of its
functions. Though absolute and unfettered freedom
cannot be granted to the State-owned company but a
wide latitude and flexible approach should be
conceded to it especially when the price fixation is
outside the realm of statutory control.
Core-sector industries are of intrinsic
importance to the economy of the country. They are
given assured supply of coal by the Standing Linkage
Committee which is a committee formed as per the
guidelines of the Ministry of Coal, Government of
India. The core sector industries consume nearly
90% of the entire production of the respondent
company. In fact, the Power Sector consumes nearly
75% and the other industries consume nearly 15% of
the entire production and only 10% or less is being
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 8
drawn by other medium/small-scale industries. As
per the averments made in the counter affidavit, the
electricity which is being generated by the Power
Sector, the quantity of coal consumed amounts to 75%
of the product cost. To generate one unit of
electricity, 0.5 kg to 1 kg quantity of coal is
consumed. In case of cement, steel and fertilizers,
the percentage of cost of coal in the entire cost of
production is ranging from 15% to 25%. Keeping in
view the several factors, the Board of Directors
after due deliberations felt that the core sector
industries are of intrinsic importance to the
building of the nation and to the common man in
general. It was thought fit to keep the price
increase at particular levels for the core
industries and charge a bit extra from other
industries. This was a policy decision taken by the
respondent company with regard to price fixation.
Any increase in prices for the core-sector
industries will automatically affect market economy.
Taking an instance, increase in the price of coal,
to the Electricity Board, will have a serious impact
on every institution or an individual consuming
electricity. Electricity has become an essential
commodity and is required for running industry,
commercial activity, locomotives, agriculture and
for the domestic use. Every category of consumer
shall have to pay more resulting in cascading effect
of increasing the price of every commodity. This is
not the case of industries like Paints, Lime etc.
which are used once in a while. By any increase in
the price of coal supply to them, the common man
would not be affected much. Even otherwise, the
increase in the price is passed on the consumers by
the appellants. Their end product does not have a
national bearing. The products of these industries
are not of an everyday concern for a common man.
The primary consideration for placing the seven
industries in the core-sector is of their intrinsic
importance to the economy of the country and the
role which they play in the nation building
activities. The same consideration will hold good
for charging lesser price from them. The
requirement of coal in the core-sector is on the
higher side either for captive power generation or
for other uses for the manufacturing operations. Any
substantial increase in the price of coal shall have
a substantial effect on the cost of finished
products of vital importance and the cost of service
to the public. Counsel for the respondent has
submitted before us that 70% of the cement
manufactured by the country is utilized by the
Central or State Governments for the construction of
projects, bridges, roads etc. Any increase in the
price of coal supplied to the core industries would
result in the increase of cost of essential
commodities such as electricity, cement, and steel.
The consumption of coal is quite high and is a major
input of these industries. In the case of non-
linked industries the coal consumption is minimal
and the increase in the price will not result any
appreciable increase in the cost of products
manufactured by non-linked sector industries.
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 8
Keeping in view the intrinsic importance of the
core-sector consumers and their importance in the
national building activities and the extent of
consumption of coal either for captive power
generation of for use in manufacturing operations
legitimately calls for a special treatment as far as
these industries are concerned. For charging lesser
prices or evolving a dual price policy, it cannot be
said that equals are treated unequally or that the
classification does not rest on rational basis. The
objective of dual pricing purportedly is to ensure
that core-sector industries or customers are not
unduly burdened with price increase while at the
same time the respondent gets adequate return for
its products so as to cover the financial deficit.
There is no such law that a particular commodity
cannot have a dual fixation of price. Dual fixation
of price based on reasonable classification from
different types of customers has met with approval
from the courts. Monopolistic organizations like
Electricity Boards, Petroleum Corporations are
having dual price fixation. It is a common feature
that Electricity Boards which generate power sell
the power at different rates to different types of
customers such as domestic, agricultural and
industrial consumers. Even different types of
industries are charged different rates.
Keeping in view the law laid down by this Court
in Union of India v. Cynamide India Ltd.(supra)
and M/s. Shri SitaRam Sugar Co. Ltd. v. Union of
India (supra), in our opinion, the High Court did
not fall into an error in upholding Clause 10 of the
Price Notification dated 14.3.1997. The High Court
rightly came to the conclusion that Clause 10 of the
Price Notification did not violate the equality
clause of Article 14 of the Constitution of India.
By evolving the dual price policy and charging
lesser price from the core-sector industries the
respondent has not treated equals as unequals or
that the classification made was not rational.
For the reasons stated above, we do not find
any merit in these appeals and dismiss the same.
The parties shall bear their own costs in this
Court.