Full Judgment Text
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CASE NO.:
Appeal (civil) 2258 of 2008
PETITIONER:
Mahalakshmi Sugar Mills Co. Ltd.& Anr
RESPONDENT:
Union of India & Ors
DATE OF JUDGMENT: 31/03/2008
BENCH:
S.B. Sinha & V.S. Sirpurkar
JUDGMENT:
J U D G M E N T
CIVIL APPEAL NO. 2258 OF 2008
(Arising out of SLP (C) No.481 of 2007)
With
Civil Appeal Nos. 2260 AND 2261-2272 of 2008
(Arising out of SLP (C) NOs.14130 and 14967-14978 of 2007)
S.B. Sinha, J.
1. Leave granted.
2. What are the factors which are required to be taken into consideration
by the Central Government for determining the price of levy sugar in
exercise of its power under Section 3(3C) of the Essential Commodities Act,
1955 (the Act) is the question involved herein.
3. Before us, there are various owners of sugar mills who purchased
sugarcane from the farmers.
4. Section 3(2)(f) of the Act empowers the Central Government to fix
compulsory quota of sugar produced by a sugar producer in the manner
prescribed by the Central Government including the price thereof at which
the same is to be sold. It is known as "levy sugar". The rest of the sugar,
however, can be sold by the producers in free market. It is known as "free
sugar".
5. The factors which are relevant to be taken into consideration by
Central Government is contained in Section 3(3C) of the Act which
includes:
(a) The minimum price, if any fixed for Sugarcane by the Central
Government.
(b) The manufacturing cost of sugar.
(c) The duty or tax, if any, paid or payable thereon; and
(d) Securing a reasonable return on the Capital employed in the business
of manufacturing,
and different price may be determined from time to time for different
areas or for different factories or for different kind of sugar.
6. In these appeals, we are concerned with the determination of price of
sugar for the sugar years 1983-84 and 1984-85.
7. The Central Government, in exercise of its power conferred upon it
under Section 3 of the Act, made an order known as the Sugarcane Control
Order. Clause 5A of the said order reads, thus :
"Clause 5A. Additional price for sugarcane
purchased on or after 1st October 1974:
(1) Where a producer for sugar or his agent
purchases sugarcane, from a sugarcane
grower during each sugar year, he shall, in
addition to the minimum sugarcane price
fixed under Clause 3, pay to the sugarcane
grower an additional price, if found due, in
accordance with the provisions of the second
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Schedule annexed to this Order.
XXX XXX XXX
(4) The additional price determined under sub-
clause (2) or sub-clause (3) as the case may
be, shall be paid by the producer of sugar to
the sugarcane grower, at such time and in
such manner as the Central Government or
the State Government, as the case may be,
from time to time, direct.
(5) No additional price determined under sub-
clause (2) or sub-clause (3), as the case may
be, shall become payable by a producer of
sugar who pays a price higher than the
minimum sugarcane price fixed under clause
(3) to the sugarcane grower.
Provided that the price so paid shall in no
case be less than the total price comprising
the minimum sugarcane price fixed under
clause (3) and the additional price fixed
determined under sub-clause (2) or sub-
clause (3), as the case may be.
(6) Where any extra price is paid by the
producer of sugar to the sugarcane grower
for the supply sugarcane in addition to the
minimum sugarcane price fixed under clause
(3), the extra price so paid shall be adjusted
against the additional sugarcane price
determined under sub-clause (2) or sub-
clause (3), as the case may be, and the
balance, if any, shall be paid to the
sugarcane grower.
(7) Subject to the provisions of sub-clause (4),
the additional price shall become payable to
a sugarcane grower, if he, in performance of
his agreement with a producer of sugar,
supplies not less than 85% o the sugarcane
so agreed:
(* Provided that the Central Government or
the State Government as the case may be,
may if it is satisfied that the appellant had
sufficient cause for not preferring the appeal
within a further period of thirty days, admit
if presented within a further period of fifteen
days.
(Provided that the additional price shall
become payable to a sugar grower even
when he supplies less than 85% of the
sugarcane so agreed, if for the same supply
he has not been subjected to any penalty by
or under any Central or State Act or any
rules or orders made thereunder for his
failure to supply 85% of sugarcane so
agreed."
8. Some of the States in India, however, even prior to coming into force
of the said Parliamentary Act, had enacted Legislative Acts, inter alia,
providing for to regulation and control of production of sugar.
9. We may notice that in the State of Uttar Pradesh, the Government of
Uttar Pradesh enacted Sugar Control Act, 1938. The Legislature of the State
of Uttar Pradesh, furthermore, enacted UP Sugarcane (Regulation of Supply
and Purchase) Act, 1953.
10. We may divide the mode and manner in which the prices for levy
sugar were to be fixed by the Central Government in three different periods.
11. Prior to 1.10.1974, the Central Government, for arriving at the price
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of levy sugar, used to mop up the entire excess realization of amount
received by the owners of the sugar mills out of sale of free sugar as no
restriction thereupon was imposed.
12. Levy sugar price also used to be premised on Statutory Minimum
Price (SMP), a factor specified in clause (a) of Section 3(3C) of the Act
which is to be determined in terms of clause (3) of the Sugarcane Control
Order, 1966 and not on the actual cane prices paid by the sugar factories to
the cane growers.
13. The Central Government, however, appointed a Committee
commonly known as Bhargava Commission. It gave its recommendations,
inter alia, opining that mopping up of the extra sale realization should be
confined to 50%.
14. The Central Government, relying on or on the basis of the
recommendations of the said Commission, introduced clause 5A in the said
Order as a result whereof additional price came to be paid to the growers of
sugarcane (1) over and above the SMP by the sugar producers; (2)
equivalent amount from free market sales realization came to be retained by
the sugar producer.
15. In terms of the said amendment carried out in Sugarcane Control
Order in the year 1974, while determining the levy sugar price, 50% of the
mopping up was permitted provided the liability of sugar producers towards
cane growers to the extent of 50% of excess realization was also taken to be
a factor as a part of cost of production. To put it differently, in the earlier
scenario whereas entire extra sales realization was applied to reduce the
price of levy sugar, upon amendment of the said Order, only 50% of the
entire sales realization was considered to be permissible to reduce the price
of levy sugar provided the liability of excess realization was also considered
as a part of cost of production.
16. Post October 1974, therefore, apart from the levy sugar being based
on the SMP only, the same was based on the actual cane price payable by
the sugar producer. However, according to the sugar mill owners, the
Central Government continued with the exercise of determination of the
price of levy sugar on the basis of 100% mopping up and had not been
considering the said changed scenario.
17. We may also notice that the State of Uttar Pradesh in purported of its
power conferred upon it under Section 16 of the 1953 Act enforced a price
to be paid by the owners of the sugar mill to the producers known as State
Advisory Price (ASP). Indisputably, the SMP as also the ASP for sugarcane
varied from year to year.
18. Questioning the mode of calculation resorted to by the Central
Government in determining the price of levy sugar, particularly, the effect of
clause 5A of the Sugarcane Control Order, as also the price levied by the
State known as ASP, Mahalakshmi Sugar Mills and Hari Nagar Sugar Mills
filed writ applications before the Delhi High Court in the year 1985.
19. Indisputably, similar writ applications for different sugar mills were
filed by different owners of the sugar mills.
20. One of the contentions raised in the said writ applications was that
100% mopping up was illegal and the liability of the sugar producers
towards the cane growers was to be considered before arriving at the price of
levy sugar.
21. One of the matters which came up before this Court is Shri
Malaprabha Cooperative Sugar Factor v. Union of India (Malaprabha-I)
since reported in [(1994) 1 SCC 648] wherein this Court, inter alia, held :
"102. In paragraph 2.15 the details of the scheme
were given as follows:
"SUGARCANE SUPPLIES STABILISATION
SCHEME
2.15 The details of the scheme are as follows:
(1) A statutory minimum price for sugar-cane
related to a basic recovery of 8.6 per cent with a
premium for every 0.1 per cent increase in
recovery on proportionality basis will be fixed by
the Government of India.
(2) The minimum price payable by individual
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factories will be fixed on the basis of the recovery
of the factory for the normal crushing period of the
previous season.
(3) The statutory minimum price as fixed above
shall be paid to all the cane growers subject to
clauses (18) and (19) of this scheme.
(4) The factories shall share their extra sales
realisation from sugar with the cane growers who
execute agreements for supply of cane and fulfil
contracts.
(5) The extra sales realisations shall be calculated
according to the following formula:
S=R-L
Where S stands for the amount shareable; R stands
for the sales realisations ex-factory excluding
excise duty paid or payable to the factory by the
purpose; and L stands for sugar price as calculated
on the basis of the statutory minimum cane price
and according to the Tariff Commission schedules
in force at the time. (In periods of control and
partial control, L stands for the final levy price of
sugar fixed by Government.)
(6) The sales realisations will be in respect of the
sugar produced during the season.
(7) The sales realisations will comprise\027
(i) the actual amount realised up to and
inclusive of September 30; and
(ii) the estimated value of the unsold stocks held
at the end of September 30.
In case (ii) the value of the stocks will be
calculated at the average rate of the sales made
during the last fortnight of September.
(8) The excess or shortfall in realisation from the
actual sale of the unsold stock of the season after
September 30 shall be carried forward to and
adjusted in the extra sales realisations of the
following season.
(9) The extra realisation shall be divided equally
between the factory and the cane growers. ..."
104. It is true that Clause 5-A deals with
additional price payable to the sugar-cane
grower. However, if the recommendations
made by the Bhargava Commission and the
method of computation are taken into
consideration, it will be clear that the
producer of sugar will be entitled to retain
an amount equivalent to the amount paid to
the cane grower under Clause 5-A. That
amount cannot be taken into consideration
for determination of the price of levy sugar.
This will be evident from paragraphs 2.17,
2.20, 2.21 and 2.39 of Chapter II of
Bhargava Commission Report."
It was furthermore observed :
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"108. We are unable to agree with the submissions
advanced on behalf of the Government that Clause
5-A deals only with the amount payable to the
cane grower and that it cannot have any relevance
for determination of levy sugar. If the
determination of minimum price of sugar and
fixation of the price of levy sugar under quantity of
sugar to be supplied by the producer are inter
connected, then they must be read as a whole and
not separately as though each is distinct. While
fixing the price of levy sugar regard is had only to
the minimum cane price as spoken to under
Section 3(3-C)( a ). This minimum cane price is
referable to clause (3) of Sugar-cane (Control)
Order. The additional price payable to the cane
grower under Clause 5-A will arise after the expiry
of the sugar year. Sugar price will have to be met
only from the extra realisation made by the
producer by the sale of sugar in free market which
will naturally be more than the levy price.
109. In view of the above discussion, the
impugned notifications except the one dated
November 28, 1974 cannot be upheld. The reason
why we leave out the notification dated November
28, 1974 is that the same came to be issued before
the new pricing policy was introduced. We hereby
direct the Union of India to amend the notifications
taking into account the liability of the
manufacturers under Clause 5-A of the Sugar-cane
(Control) Order as regards cane price and refix the
price of levy sugar having regard to the factors
mentioned in Section 3(3-C) of the Act. The
Government will have time to issue the amended
notifications as directed above till December 31,
1993."
22. Indisputably, a review application filed thereagainst was dismissed by
this Court by an order dated 23.2.1994. The Central Government filed an
application praying for clarification as also for extension of time so as to
enable it to re-determine the price of levy sugar which by an order dated
22.2.1995 was dismissed but the time for re-fixation of the price was
extended as prayed for. It appears that during the pendency of the said writ
petitions, in the said appeals before this Court in Malaprabha-I, a transfer
application came to be filed by Modi Industries Ltd. The sugar year
involved therein was 1982-83. In that case, the Central Government stated
that additional cane price payable under clause 5A of the Sugarcane Control
Order, 1966 had not been taken into consideration and furthermore no
mopping up of excess realization on levy free sale sugar having been
resorted to while fixing the levy price for the year 1982-83 by a judgment
and order dated 30.1.1996 opined that Malaprabha-I was not applicable. The
said decision is since reported in Modi Industries Ltd. & Anr. v. Union of
India & Ors. [1999) 9 SCC 245]. This Court therein opined :
"In compliance with our order dated 30.1.1996, an
additional affidavit on behalf of the Union of India
has been filed by Shri Deepak Khandekar, Deputy
Secretary to the Government of India. In the
additional affidavit, it has been expressly stated
that while determining the minimum cane price of
levy sugar in regard has been had only to the
minimum cane price as spoken to in Section 3(3-
C)(a) of the Essential Commodities Act, 1955 and
the additional cane price payable under clause 5-A
of the Sugar (Control) Order, 1966, has not been
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taken into account, and that also there has been no
mopping up of excess realization on levy-free sale
sugar while fixing the price of levy sugar for the
season 1982-83.
In view of the above further statement made in the
additional affidavit filed on behalf of the Union of
India, we are satisfied that this matter is not
covered by the decision of this Court in Shri
Malaprabha Coop. Sugar Factory Ltd. v. Union of
India [(1994) 1 SCC 648]."
23. We may notice that similar orders were passed by this Court on
19.8.1998 in the case of Bharat Sugar Mills Ltd. & Anr. v. Union of India &
Ors. and Union of India & Ors. v. Triveni Engg. Works Ltd. & Ors. by a
judgment and order dated 2.2.1999 which are since reported in (1999) 7
SCC 246 and (1999) 7 SCC 244 respectively. In Bharat Sugar Mills (supra)
as also in Triveni (supra), this Court followed the decision in Modi on the
premise that the sugar year involved therein was also 1982-83.
24. It is, however, of some significance to notice that in the case of Bharat
Sugar Mills, the Central Government in its counter affidavit filed on
16.4.1998, in response to the Court’s order in regard to the sugar year 1983-
84 and 1984-85 to re-fix the price, stated :
"It is submitted that in regard to the Levy Sugar
(Price Determination 1982-83 Production) Order,
the Supreme Court has already upheld the
notification issued under Essential Commodities
Act in M/s Modi Industries Ltd. v. Union of India
& Anr. [TC (C) No.9 of 1990 (Annexure-I)].
In the case of Malaprabha Co-operative Sugar
Factory Ltd. v. Union of India the Supreme Court
had in their order dated 22.9.1993 [(1994) 1 SCC
648] and order dated 28.1.1997 directed the
refixation of ex-factory price of levy sugar for the
season 1974-75 to 1979-80. The Supreme Court
had in its order dated 28.1.1997 held that their
order dated 20.2.1996 in TC (C) No.9 of 1990 was
applicable only in respect of sugar year 1982-83
and it cannot have any bearing for the years 1975-
76 to 1979-80.
Based on the judgment delivered by the
Supreme Court Order dated 28.1.1997 in the case
of M/s Malaprabha Co-operative Sugar Factor Ltd.
& Ors. v. Union of India & Ors., the Government
is considering the question of revision of levy
sugar prices for the years 1974-75 to 1979-80 and
other subsequent years with the exception of the
sugar year 1982-83 in accordance with the
directions contained in the aforesaid judgment."
25. Relying on or on the basis of the said assertion made by the Central
Government, this Court, by an order dated 21.4.1998, directed :
"T.C. (Civil) Nos. 18-20, 23-28, 30, 32-36 and 38-
39/9 are disposed of in the light of the judgments
of this Court in Malaprabha Coo-operative Sugar
Factory Ltd. Vs. Union of India & Anr. (1994 (1)
SCC 648) read with 1997 (1) SCC 216. The
respondents 2 and 3 in their counter dated 16.4.98
have also stated that for these years they are
revising sugar prices in the light of the above two
judgments. It is, therefore, ordered accordingly.
The prices will be fixed within 12 weeks from
today. In respect of the year 1982-83 the
respondents shall file an additional affidavit setting
out the basis on which the prices have been fixed
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for the zones with which we are concerned in the
Transferred Cases. The affidavit will be filed
within six weeks. Rejoinder may be filed within
two weeks thereafter. Rest of the TCs. are
adjourned till after the summer vacation."
26. The Central, Government, therefore, in no uncertain terms took the
stand that they would follow Malaprabha-I in the involving relevant sugar
years except for the year 1982-83.
27. The question of implementation of Malaprabha-1 vis-‘-vis Modi again
came up for consideration before this Court, as some interlocutory
applications were filed in Shri Malaprabha Co-op. Sugar Factory Ltd. v.
Union of India & Anr. (Malaprabha-II) [(1997) 10 SCC 216]. This Court
noticed the wrong attitude on the part of the Central Government to find
excuses for not complying with the judgment of this Court as the same was
not palatable to them. It therein moreover noticed several notifications
issued by the Central Government from time to time. Upon consideration of
several contentions raised by the Central Government in Malaprabha-I, this
Court pointed out how the Union of India had been making attempt(s) to
misconstrue and misinterpret the earlier judgments. It, upon noticing the
contentions of the Central Government that Section 3(3C) of the Act and
clause 5A were totally independent, in Malaprabha-I, held :
"If the determination of minimum price of sugar
and fixation of the price of levy sugar under
quantity of sugar to be supplied by the producer
are interconnected, then they must be read as a
whole and not separately as though each is
distinct".
28. The factors which were to be taken into consideration, therefore, were
necessary to depress and reduce the levy sugar price. It was also noticed that
clause 5-A was introduced as a new pricing policy creating a new liability
upon the owners of the sugar mills observing :
"In view of this new liability this Court held that
the Government was bound to take that also into
account while fixing the price of levy sugar,
without specifying as to whether the liability
became component of Factor A’ or Factor ’B’ or
both those factors of Section 3(3-C)."
29. Dealing with a new contention which was raised by the Union of India
visa-vis the decision in Modi, it was observed that the direction given in
paragraph 109 of Malaprabha-I was quite clear and did not lend itself to two
interpretations and there was no confusion in relation thereto as thereby this
Court had directed the Central Government to take into account the liability
of the manufacturer under clause 5A of the 1996 order as regards cane price
for re-fixation of the price of levy sugar. It was commented :
"The doubt or confusion, if any, appears to us to be
the result of unwillingness of the Government to
give up its views and accept and implement the
decision of this Court."
30. It was furthermore clarified that the issue as to whether the entire or
only 50% of the free sugar price could be mopped up in view of the new
price policy contained in clause 5A for depressing the levy of the price,
stating :
"Since by the new pricing policy a benefit was
sought to be conferred on the producer of sugar by
making him entitled to retain 50% of the extra
realization, this Court held that the said amount
cannot be taken into consideration for
determination of the price of levy sugar. That was
entirely a different aspect. The observation which
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is made in para 109 and the direction given therein
is with respect to the aspect of sugar producer’s
liability to pay additional sugarcane price. Clause
5-A being interconnected with Section 3(3-C), this
new liability would certainly get projected into
Factors ’A’ and ’B’ of Section 3(3-C). As earlier
pointed out mopping up of extra realization is an
element of Factor ’D’ of Section 3(3-C). Thus, the
contentions raised on behalf of the respondents
even otherwise also do not deserve to be
accepted."
31. Distinguishing Modi (supra), the law was stated in the following
terms :
"Even if the Government has omitted to take into
consideration one unfavourable element, namely,
mopping up of excess realization it cannot justify
its omission to take into consideration another
relevant element which is favourable to the
producer of sugar."
32. It was, therefore, emphasized that whereas an unfavourable element,
namely, mopping up of excess realization is to be taken into consideration,
the favourable element, namely, liability created towards cane growers for
the purpose of determination of the price could not have been ignored.
33. Two different Benches of the Delhi High Court, however, reacted
differently to the aforementioned decisions of this Court by reason of the
judgments which are impugned before us in the case of Hari Nagar Sugar
Mills disposed of on 16.3.2005 and in the case of Mahalakshmi Sugar
Company disposed of on 9.11.2006.
34. Before noticing the respective contentions of the learned counsel
appearing for the parties herein, we may notice two other decisions of this
Court.
35. In The Godavari Sugar Mills Ltd. v. Union of India & Anr. [JT 2001
(10) SC 527] wherein the relevant sugar year was 1985-86, a question arose
as to whether after a long lapse of time, the petitioner therein should be
permitted to raise new contentions through a writ petition. This Court
refused to exercise its discretionary jurisdiction in permitting the petitioner
therein to do so holding that the same will have great financial impact on the
Central Government. The Bench chose to follow Modi (supra).
36. A contempt petition was also filed by Malaprabha-I for non-
implementation of the decisions of this Court wherein a Bench of this Court
opined that no contempt has been committed by the Central Government.
The said decision is reported in Malaprabha Coop. Sugar Factory Ltd. v.
Union of India & Anr. (Malaprabha-3) [(2002) 9 SCC 716]. It was held :
"This Court in the aforesaid two decisions has said
that the retention of 50 per cent is a factor which
can be taken into consideration in determining
element (d) in Section 3(3C) of the Essential
Commodities Act. The working statement given
before us shows that this has been done, not to the
extent as desired by the petitioners, but the result
of this is that the levy price fixed at Rs.163.780 in
respect of West U.P. has gone up to Rs.172.430.
In our opinion, the said fixation is in accordance
with law and the directions given by this Court
have been complied with. Neither a case for
contempt has been made out nor is there any
justification, in our opinion, for giving any
direction to the Government to refix the levy price
under Section 3(3-C) of the Essential Commodities
Act."
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37. To complete the narration of facts, we may also notice that validity of
the orders passed by the State of U.P. in purported exercise of its power
under Section 16 of the 1953 Act was questioned before a Division Bench of
the Allahabad High Court in West UP Sugar Mills Association & Ors. v.
State of U.P. & Ors. [1997 (1) UPLBEC 541]. A Division Bench of the said
Court noticed that the purported policy of the State of Uttar Pradesh which
had been prevailing from 1973 was ultra vires, the legislative field being
covered under the Essential Commodities Act. The UP Cooperative Cane
Union Federations came up before this Court questioning the correctness of
the said judgment. The matter was referred to a Constitution Bench. The
majority reversed the decision of the Allahabad High Court holding that the
State in exercise of its power of regulation and control of sugar industries
could fix a higher price for the sugarcane, stating :
"These cases clearly lay down that under the 1966
Order, the Central Government only fixes the
minimum price and it is always open to the State
Government to fix a higher price. Under the
enactments made by the State Legislatures, areas
are reserved for the sugar factories and the cane-
growers therein are compelled to supply sugarcane
to them and therefore, the State Government has
incidental power to fix the price of sugarcane
which will also be the statutory price. They further
lay down that the Cane Commissioner can direct
the cane-growers and the sugar factories to enter
into agreements for purchase of sugarcane at a
price fixed by the State Government and such
agreements cannot be branded as having been
obtained by force or compulsion."
It was furthermore held :
"The second reasoning given by the High Court is
that even if the State Government had the power to
fix the minimum cane price under Section 16 of
the 1953 Act, this power came to an end in view of
Article 254(1) of the Constitution on the enactment
of the EC Act and the promulgation of the
Sugarcane (Control) Order, 1955 (later replaced by
the 1966 Order), which now gives exclusive power
to the Central Government to fix the minimum
price. As discussed earlier, we are not in
agreement with the aforesaid reasoning as the
question of repugnancy does not arise. The High
Court has also held that the Central Government,
while fixing the price of sugar under Section 3(3-
C) of the EC Act, takes into consideration the
minimum price of sugarcane fixed under the 1966
Order and if the sugar mills are compelled to pay a
higher price than that fixed by the Central
Government, it will disturb the price of the levy
sugar and such an eventuality could not have been
contemplated by the legislature. Over a period of
time, the quota of levy sugar has gone down from
40 per cent to 10 per cent of the total production of
sugar and the sugar mills are now free to sell 90
per cent of their production in open market. Under
Section 3(3-C) of the EC Act, the Central
Government has to determine the price of the levy
sugar having regard to several factors enumerated
in the sub-section and the minimum price fixed
under the 1966 Order is only one of the factors.
The manufacturing cost of sugar and securing of
reasonable return on the capital employed in the
business of manufacturing sugar are also relevant
factors under clause (b) and (d) of Section 3(3-C)
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of the EC Act and, therefore, the fixation of higher
price for sugarcane by the State Government by
itself cannot have any major or substantial impact
on the fixation of the price of the levy sugar by the
Central Government."
38. We have noticed hereinbefore the divergent views taken by two
Division Benches of the Delhi High Court.
39. In the case of Mahalakshmi Sugar, the Delhi High Court framed three
issues :
"(a) Whether, in view of the judgments of
the Hon’ble Supreme Court in
Malaprabha-I and Malaprabha-II the
impugned order of the Central
Government fixing the price of levy
sugar for 1984-1985 is liable to be
struck down inasmuch as it admittedly
does not account for the additional
price payable by the sugar
manufacturer under Clause 5A of the
Control Order?
(b) Is the Central Government, while
fixing the price of levy sugar under
Section 3(3C) EC Act, liable to
account for the SAP fixed by the State
of UP and mandatorily required to be
paid by the sugar manufacturer to the
sugarcane grower?
(c) Is the State of UP liable to bear the
liability arising out of the difference
between the SAP and the combination
of the SMP and the additional price?"
40. In regard to the first issue, it was held that the decision in Modi
(supra) covers the field in regard to the application of the factor of payment
of additional price to the cane growers. In regard to the factor of State
Advice Price (SAP), the High Court upon noticing paragraph 44 of the
judgment in Cane Growers Federation (supra) held that the same was not a
relevant factor for the purpose of determination of the price of levy sugar. In
regard to the issue (c), it was held that the State of Uttar Pradesh is not liable
to pay the difference of price to the writ petitioners.
41. Mr. Nageshwar Rao, learned senior counsel appearing on behalf of the
appellant in CA @ SLP (C) No.481/07 (Mahalakshmi) urged :
1. Determination of price of levy sugar being a statutory legislative
function, the Central Government could not have ignored any of the
factors laid down therefor.
2. As in Malaprabha-I, levy of additional price in terms of Clause 5A of
the order was held to be a relevant factor within the meaning of clause
(b) of Section 3(3C) of the Act, the Central Government could not
have ignored the same only on a specious plea that the mopping up of
the excess amount realized by the sugar mill owners have come down
from 100% to 50%.
3. In view of the clear and unambiguous directions of this Court in
Malaprabha-I, as clarified in Malaprabha-II, the Central Government
was obligated to take into consideration the fact that the liabilities of
the owner towards the cane grower in terms of Clause 5A of the Order
as also the State Advice Price would follow in purview of clauses (b)
and (d) of Section 3(3C) of the Act.
4. A Constitution Bench of this Court having opined that imposition of
SAP being statutory in nature and as the same enhanced the liability
of the sugar mill owners to be a relevant factor for determination of
the price of levy sugar both under clauses (b) and (d) thereof, the High
Court committed a serious error in passing the impugned judgment.
5. The High Court misread and misinterpreted the observations of this
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Court in paragraph 44 of the UP Cane Growers’ case wherein it had
categorically been held that SAP for the purpose of determination of
the price of levy sugar would come within the purview of clause (b) of
Section 3(3C) of the Act.
6. Price of sugarcane for being 70% component of the price of sugar, the
total liability of the owner in relation thereto was mandatorily required
to be considered by the Central Government.
7. In view of the stand taken by the Central Government itself in the case
of Bharat Sugar Mills for the sugar years 1983-84 and 1984-85 which
was not confined to the case of the petitioners therein, the Central
Government could not have taken a different stand in the instant
cases.
42. Mr. Mohan Parasaran, learned Additional Solicitor General appearing
on behalf of the Union of India, on the other hand, urged :
1. In view of the decisions of this Court in Malaprabha-I, the Central
Government sought to rectify the mistake by introducing Clause 5A in
the Sugar Control Order in terms whereof the additional price required
to be paid to the cane growers was to be adjusted with the 50%
mopping up from the excess amount realized by the owners of the
sugar mills.
2. This Court in Malaprabha-3 having found the action on the part of the
Central Government to be in terms of the decision of this Court in
Malaprabha-I, no case has been made out for interference with the
impugned judgment.
3. There being no difference in determination of the price for levy sugar
for the years 1982-83 and 1985-86 vis-‘-vis sugar year 1983-84 and
1984-85, this Court should affirm the decision of the Delhi High
Court dismissing the writ petition of the owners, particularly, when a
similar view has been taken in Bharat Sugar Mills (supra) and Triveni
(supra).
4. In any event, even on equitable considerations, this Court should not
interfere with the decision of the High Court after such a long time.
5. Power of judicial review in the case of the price fixation being
limited, this Court should not interfere in the matter particularly
having regard to the fact that fixation of price is a legislative function.
43. The Parliament enacted the Essential Commodities Act, 1955 to
provide in the interest of general public, the control of production, supply
and distribution of, and trade and commerce, in certain commodities.
Section 3(3C) of the Act reads as under :
"3.(3C) Where any producer is required by an
order made with reference to clause (f) of sub
section (2) to sell any kind of sugar (whether to the
Central Government or a State Government or to
an officer or agent of such Government or to any
other person or class of persons) and either no
notification in respect of such sugar has been
issued under sub-section (3A) or any such
notification, having been issued, has ceased to
remain in force by efflux of time, then,
notwithstanding anything contained in sub-section
(3), there shall be paid to that producer an amount
therefor which shall be calculated with reference to
such price of sugar as the Central Government
may, by order, determine, having regard to-
(a) the minimum price, if any, fixed for sugarcane
by Central Government under this section ;
(b) the manufacturing cost of sugar;
(c) the duty or tax, if any, paid or payable thereon;
and
(d) the securing of a reasonable return on the
capital employed in the business of manufacturing
sugar and different prices may be determined from
time to time for different areas or for different
factories or for different kinds of sugar.
Explanation.-For the purposes of this sub-section,
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"producer" means a person carrying on the
business of manufacturing sugar."
44. A direction by the Central Government to the owners of the sugar
mills that a part of their products would be sold at a price determined by it
was within its realm. Such a quota could be fixed by the Central Govrnment
in exercise of its power under Section 3(2)(f) of the Act.
45. Indisputably, determination of price in terms of the provisions of the
Act is a legislative function. The Superior Courts ordinarily would not
interfere therewith. But when such a function is carried out in contravention
of the statutory requirements, the courts are not powerless. In a case of this
nature, it becomes the duty of the Court to interpret its earlier judgments and
refer the one which is applicable.
46. Determination of a price is required to be carried out keeping in view
certain factors specified therein. The term "having regard to" plays an
important role in the matter of construction of the relevant provisions of the
Act. If a price is determined without applying the principles underlying the
factors enunciated in Section 3(3C) of the Act, the superior courts can issue
requisite direction.
47. When the validity a notification issued by the Central Government in
exercise of its power under a statute is questioned, even if the provision is
directory in nature, substantial compliance thereof must be shown to have
been made. The statutory authority must apply its mind.
48. The directions issued in the decisions of this Court must be
demonstrated to have been complied with. {See Shri Sita Ram Sugar
Company Ltd. v. Union of India [(1990) 3 SCC 223]}. [See also
Commissioner of Income-Tax, West Bengal, Calcutta v. Gungadhar
Banerjee & Co. (P) Ltd. [(1965) 3 SCR 439, Page 444, Placitum E to Page
445, Placitum C]; The Panipat Co-operative Sugar Mills v. The Union of
India [(1973) 1 SCC 129, Para 30]; The State of Karnataka & Anr. v. Shri
Ranganatha Reddy & Anr. [(1977) 4 SCC 471], Paras 22 to 24; State of U.P.
& Ors. v. Renusagar Power Co. & Ors. [(1988) 4 SCC 59, Paras 80-84]; Shri
Sitaram Sugar Company Ltd. & Anr. v. Union of India & Ors. [(1990) 3
SCC 223, Paras 28-30]; Kuldip Chand & Anr. v. Advocate-General to
Government of HP & Ors. [(1990) 4 SCC 356, Para 15]; Delhi Farming &
Construction (P) Ltd. v. Commissioner of Income Tax, Delhi [(2003) 5 SCC
36, Para 26].
49. Section 3(3C) of the Act specifies four factors. The Statutory
Protected Price, as specified by the Order, would be a factor which would be
covered by clause (a). The Central Government, however, cannot ignore the
other factors.
50. How the statutory direction to pay additional price to the cane
growers, as envisaged under clause 5A of the Order or the State Advisory
Price as mandated by the States in exercise of their regulatory power ,would
be applied in determining the price of levy sugar was the subject matter of
various decisions of this Court.
51. In Malaprabha-I, this Court noticed the statutory change effected by
reason of insertion of Clause 5A in the Order w.e.f. 1.10.1974. The question
raised before this Court was that in price fixation, the Central Government
had not taken into consideration the relevant criteria laid down under Section
3(3C) of the Act while issuing notifications in regard to the fixation of price
of levy sugar. Noticing the decision of this Court in Indian Express
Newspapers (Bombay) Private Ltd. and Ors. v. Union of India and Ors.
[(1985) 1 SCC 641], it was held that subordinate legislation can be
questioned on any ground on which the primary legislation could be
questioned. The premise of judicial review may be glanced from the
following observations made by this Court in Bombay Dyeing &
Manufacturing Co. Ltd. v. Bombay Environmental Action Group [(2006) 3
SCC 434] :
"80. A policy decision, as is well known, should
not be lightly interfered with but it is difficult to
accept the submissions made on behalf of the
learned counsel appearing on behalf of the
Appellants that the courts cannot exercise their
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power of judicial review at all. By reason of any
legislation whether enacted by the legislature or by
way of subordinate legislation, the State gives
effect to its legislative policy. Such legislation,
however, must not be ultra vires the Constitution.
A subordinate legislation apart from being intra
vires the Constitution, should not also be ultra
vires the parent Act under which it has been made.
A subordinate legislation, it is trite, must be
reasonable and in consonance with the legislative
policy as also give effect to the purport and object
of the Act and in good faith."
52. Judicial review of subordinate legislation has also been dilated upon
by the Court recently in Vasu Dev Singh v. Union of India [2006 (11)
SCALE 108, Paras 12 to 23]. {See also Life Insurance Corporation of India
& Ors. v. Retired L.I.C. Officers Association & Ors. [2008 (2) SCALE
484]}.
53. From these decisions, it may be deduced that validity of subordinate
legislation may be questioned on the ground that :
a) it is ultra vires the Constitution;
b) it is ultra vires the parent Act;
c) it is contrary to the statutory provisions other than those contained
in the parent Act;
d) law-making power has been exercised in bad faith;
e) It is not reasonable; and
f) it goes against legislative policy, and does not fulfill the object and
purpose of the enabling Act.
54. In Malaprabha-I, Statutory Minimum Price statutorily required to be
paid by the sugar producers to the sugarcane grower was held to be an
element so far as factor (b) of Section 3(3C) of the Act is concerned. This
Court took notice of the recommendations of Bhargava Commission. This
Court, despite its limited power of judicial review, held that the Central
Government cannot ignore any of the factors specified in Section 3(3C) of
the Act for the purpose of fixation of price for levy sugar. What was
relevant was the actual cane price paid and excess realization from free
market sales therefor.
55. In Sitaram Sugar (supra) payment of price of sugarcane to the growers
has been found to constitute 70% of the total price. Therefore, it
indisputably had a great role to play for determining the price of levy sugar.
Only with a view to determine the price, it was also necessary to take into
consideration the manufacturing cost and reasonable return on the capital
employed. The Essential Commodities Act does not contemplate that
manufacturers of sugar must continue their activities although the units were
running at a loss. Purported object for which Clause 5A was introduced was
to see that the sugar industry became entitled to excess realization of free
sugar which would give them a reasonable margin for meeting their
requirements including modernization and expansion of the Plant.
56. Sub-clause (iv) of Clause 5A of the Order mandates that the additional
price determination under sub-clause (ii) shall be paid by the producer of
sugar to the sugarcane grower. It is, therefore, mandatory in character and
added to the price of the sugarcane. It was clearly held that 50% of the
mopping up amount could not be taken into consideration for determination
of the price of levy sugar. Admittedly, mopping up of 100% was held to be
illegal.
57. It was in the aforementioned premise, this Court followed the decision
of Justice E.S. Venkataramiah in Writ Petition No.432 filed in the High
Court of Karnataka (quoted in Malaprabha-I (1994) 1 SCC 648), wherein it
was observed that if the additional price under Clause 5A is allowed to be
done, the producer of sugar would be compelled to carry on production of
sugar without having an idea of the price that is likely to be determined by
the Central Government under Section 3(3C). A producer must draw an
object, having regard to his assets and liabilities, income and expenditure,
whether he would be able to have a reasonable amount of profit or not. It
was in that situation, the Central Government was directed to refix the price
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of levy sugar. The jurisdiction of this Court to interfere in the matter had
clearly been spelt out.
58. Modi, Bharat Mills and Triveni dealt with sugar year 1982-83 only. It
proceeded on the basis that in that year, the mopping up having not been
done and levy in terms of Clause 5A had not been applied, the factors laid
down under Section 3(3C) stood complied with. It is for the aforementioned
limited extent, Malaprabha-I was distinguished. No reason has been
assigned in support of its decision. Rival contentions had not been noticed.
The effect of payment of additional price as also SAP effect in determining
the price did not fall for consideration therein. Godavari (supra), as noticed
hereinbefore, was decided on the same line, particularly, having regard to
the fact that the prayers made by the appellant therein are sought to be
amended which was not allowed.
59. It is in the aforementioned situation, Malaprabha-II assumes
significance. It not only explained the ratio laid down in Malaprabha-I but
also took into consideration Modi Industries (supra) as also fresh arguments
advanced on behalf of the Central Government. All contentions of the
Central Government were specifically rejected.
60. The decision in Malaprabha-II that while taking into consideration the
unfavourable factor, the Central Government cannot refuse to consider the
factor which is favourable to the mill owner assumes significance. We say
so for two reasons \026 (1) it is possible that while confining mopping up to the
extent of 50%, the fact of additional price paid in terms of Clause 5A of the
Order would be neutralized or adjusted but the same would not mean that the
exercise shall not be carried into effect; and (2) the effect of payment of an
extra amount in terms of State Advisory Price cannot be refused to be taken
into consideration.
61. We are not unmindful of the fact that the learned counsel for the
appellant in Mahalakshmi before the High Court confined its case only to
SAP but then in Hari Nagar Sugar Mills, the Delhi High Court accepted the
contentions which have been raised before us.
62. When the legislative policy is reflected in a statutory provision, the
Court, while being called upon to determine as to whether the same has been
complied with or not, must apply the rule of purposive construction. It is
idle, in a case of this nature, to contend that as the element of additional
price paid under Clause 5A of the Order and SAP had not been specifically
provided for in Section 3(3C), they should be kept out of consideration for
the purpose of determination of the price of levy sugar. If the actual price
payable to the cane growers is absolutely relevant for determining the price
of levy sugar, we have no doubt in our mind that consideration of the said
elements would come either under clause (b) or clause (d) of Section 3(3C)
of the Act. It was so held in Malaprabha-I. It is interesting to note that the
Constitution Bench of this Court in UP Coop. Cane Unions Federations
rejected a contention raised by the parties that in the event the State is held
to have the legislative competence to impose the same, it will have an
adverse effect on the price of levy sugar required to be determined under
Section 3(3C) of the Act as noticed supra.
63. Clauses (b) and (d) of Section 3(3C) were, therefore, clearly held to be
attracted by the Constitution Bench also.
64. The importance of applying the Rule of purposive construction has
recently been noticed by this Court in New India Assurance Co. Ltd. v.
Nusli Neville Wadia [2007 (14) SCALE 556] in the following liness :
"48. Section 5 of the Act, on a plain reading,
would place the entire onus upon a noticee. It, in
no uncertain terms, states that once a notice under
Section 4 is issued by the Estate Officer on
formation of his opinion as envisaged therein Page
0183 it is for the noticee not only to show cause in
respect thereof but also adduce evidence and make
oral submissions in support of his case. Literal
meaning in a situation of this nature would lead to
a conclusion that the landlord is not required to
adduce any evidence at all nor it is required even
to make any oral submissions. Such a literal
construction would lead to an anomalous situation
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because the landlord may not be heard at all. It
may not even be permitted to adduce any evidence
in rebuttal to the one adduced by the noticee nor it
would be permitted to advance any argument. Is
this contemplated in law? The answer must be
rendered in the negative. When a landlord files an
application, it in a given situation must be able to
lead evidence either at the first instance or after the
evidence is led by the noticee to establish its case
and/ or in rebuttal to the evidence led by the
noticee.
49. The literal interpretation of the statute, if
resorted to, would also lead to the situation that it
would not be necessary for the landlords in any
situation to plead in regard to its need for the
public premises. It could just terminate the tenancy
without specifying any cause for eviction.
50. Except in the first category of cases, as has
been noticed by us hereinbefore, Sections 4 and 5
of the Act, in our opinion, may have to be
construed differently in view of the decisions
rendered by this Court. If the landlord being a
State within the meaning of Article 12 of the
Constitution of India is required to prove fairness
and reasonableness on its part in initiating a
proceeding, it is for it to show how its prayer
meets the constitutional requirements of Article 14
of the Constitution of India. For proper
interpretation not only the basic principles of
natural justice have to be borne in mind, but also
principles of constitutionalism involved therein.
With a view to read the provisions of the Act in a
proper and effective manner, we are of the opinion
that literal interpretation, if given, may give rise to
an anomaly or absurdity which must be avoided.
So as to enable a superior court to interpret a
statute in a reasonable manner, the court must
place itself in the chair of a reasonable legislator/
author. So done, the rules of purposive
construction have to be resorted to which would
require the construction of the Act in such a
manner so as to see that the object of the Act
fulfilled; which in turn would lead the beneficiary
under the statutory scheme to fulfill its
constitutional obligations as held by the court inter
alia in Ashoka Marketing Ltd. (supra).
51. Barak in his exhaustive work on ’Purposive
Construction’ explains various meanings attributed
to the term ’purpose’. It would be in the fitness of
discussion to refer to Purposive Construction in
Barak’s words:
’Hart and Sachs also appear to treat ’purpose’
as a subjective concept. I say ’appear’
because, although Hart and Sachs claim that
the interpreter should imagine himself or
herself in the legislator’s shoes, they
introduce two elements of objectivity: First,
the interpreter should assume that the
legislature is composed of reasonable people
seeking to achieve reasonable goals in a
reasonable manner; and second, the
interpreter should accept the non-rebuttable
presumption that members Page 0184 of the
legislative body sought to fulfill their
constitutional duties in good faith. This
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formulation allows the interpreter to inquire
not into the subjective intent of the author,
but rather the intent the author would have
had, had he or she acted reasonably.’
(Aharon Barak, Purposive Interpretation in Law
(2007) at pg. 87)
52. In Bharat Petroleum Corporation Ltd. v.
Maddula Ratnavalli and Ors. [(2007) 6 SCC 81],
this Court held:
’The Parliament moreover is presumed to
have enacted a reasonable statute (see
Breyer, Stephen (2005): Active Liberty:
Interpreting Our Democratic Constitution,
Knopf (Chapter on Statutory Interpretation -
pg. 99 for Reasonable Legislator
Presumption).’
53. The provisions of the Act and the Rules in this
case, are, thus required to be construed in the light
of the action of the State as envisaged under
Article 14 of the Constitution of India. With a view
to give effect thereto, the doctrine of purposive
construction may have to be taken recourse to.
[See Oriental Insurance Co. Ltd. v. Brij Mohan
and Ors. [2007 (7) SCALE 753] .
65. We are of the opinion that the same principle should be applied
herein.
66. That is how the Central Government itself understood the decision of
this Court in Malaprabha-I. It explicitly said so in the counter affidavit filed
in Bharat Sugar Mills. Indisputably, for the purpose of determination of the
price of levy sugar, it called for the relevant materials from each of the
owner of the sugar mill. It is, therefore, too late in the day for the Central
Government to contend contra.
67. Rules of executive construction in a situation of this nature may also
be applied where a representation is made by the maker of legislation at the
time of introduction of the Bill or construction thereupon is put by the
executive upon its coming into force, the same carries a great weight.
68. In this regard, we may refer to the decision of the House of Lords in
the matter of R.V. National Asylum Support Service [(2002) 1 W.L.R.2956]
and its interpretation of the decision in Pepper v. Hart [(1993) A.C. 593]. on
the question of ’executive estoppel’. In the former decision, Lord Steyn
stated:-
"If exceptionally there is found in the Explanatory
Notes a clear assurance by the executive to
Parliament about the meaning of a clause, or the
circumstances in which a power will or will not be
used, that assurance may in principle be admitted
against the executive in proceedings in which the
executive places a contrary contention before a
court."
69. A similar interpretation was rendered by Lord Hope of Craighead in
Wilson v. First County Trust Ltd., [2004] 1 A.C. 816, wherein it was stated:-
"As I understand it [Pepper v. Hart], it recognized
a limited exception to the general rule that resort to
’Hansard’ was inadmissible. Its purpose is to
prevent the Executive seeking to place a meaning
on words used in legislation which is different
from that which ministers attributed to whose
words when promoting the legislation in
Parliament\005"
70. See for a detailed analysis of the rule of executive estoppel in a
writing of Francis Bennion entitled "Executive Estoppel: Pepper v. Hart
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revisited", published in Public Law, Spring 2007 issue, pg. 1.
71. Reliance placed by the learned Additional Solicitor General on
Malaprabha-III is not apposite. This Court therein found the action of the
Central Government to be not an act of contempt presumably because the
directions were held to have been substantially complied with. We are not
exercising any contempt jurisdiction. Contempt is a matter between the
Court and the contemnor. We are herein called upon to determine as to
which view of Delhi High Court in Hari Nagar or Mahalakshmi is correct.
We cannot refuse to lay down the law having been called upon to do so. We
must lay down a law for the future. We, therefore, while directing the
Central Government to refix the price of levy sugar, would keep this
direction confined only to the parties before us including the interveners.
The reason therefor is that the other mill owners were not aggrieved thereby.
The parties before us are fighting their grievance for more than 22 years.
They should not be allowed to go empty handed.
72. We are, therefore, of the opinion that Mahalakshmi has wrongly been
decided whereas Hari Nagar has correctly been decided.
73. Appeals arising out of SLP (C) Nos.481/2007 and 14130/2007 filed
by Mahalakshmi Sugar Mills Co. Ltd. and Govind Nagar Sugar Ltd.
respectively are consequently allowed and Appeals arising out SLP (C)
Nos.14967-14978 of 2007 filed by Union of India & Ors. are dismissed. No
costs.