Full Judgment Text
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PETITIONER:
INDIA CEMENT LTD. ETC.
Vs.
RESPONDENT:
UNION OF INDIA AND OTHERS
DATE OF JUDGMENT21/08/1990
BENCH:
VERMA, JAGDISH SARAN (J)
BENCH:
VERMA, JAGDISH SARAN (J)
PUNCHHI, M.M.
REDDY, K. JAYACHANDRA (J)
CITATION:
1991 AIR 724 1990 SCR (3) 850
1990 SCC (4) 356 JT 1990 (3) 572
1990 SCALE (2)291
ACT:
Cement Control Order 1967 Clause 12--Fixation of uniform
retention price--Legality of.
HEADNOTE:
The appellants filed writ petitions in the Madras High
Court challenging the fixation in 1969 of a uniform reten-
tion price of Rs. 100 per tonne of cement instead of the
existing three different retention prices for different
categories of producers fixed earlier on the basis of the
recommendations made by the Second Tariff Commission in
1961. The grievance of the appellants was that the fixation
of a uniform retention price to be paid to all producers for
the cement produced by them and acquired by the State Trad-
ing Corporation amounted to discrimination contravening
Article 14 of the Constitution. The challenge was rejected
by a Single Judge and, thereafter, a Division Bench of the
High Court.
Cement has been a controlled commodity for a long time
and its production, distribution and price were regulated by
Cement Control Orders issued by the Central Government from
time to time in exercise of the powers conferred under
sections 18G and 25 of the Industrial (Development & Regula-
tion) Act, 1951.
On behalf of the appellants it was contended that the
impugned Order made in 1969 fixing a uniform retention price
for all three categories of cement producers treated un-
equals as equals; that the increase of Rs.7 per tonne was to
be made to the existing three-tier retention prices, but an
irrational basis was adopted in fixing the uniform price of
Rs. 100 per tonne which resulted in an unequal increase to
the three different retention prices then existing; that
clause 12 of the Cement Control Order, 1967 did not permit
one uniform retention price; and that atleast in the case of
Chettinad Cement Corporation Ltd. discrimination was proved
on the basis of the distinction made by the High Court in
the case of M/s Travancore Cement Ltd. The appellants howev-
er did not dispute before this court that no grievance would
survive if the uniform retention price was fixed at Rs. 104
per tonne instead of Rs. 100.
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851
On behalf of the respondents it was asserted that the
industry itself had sought a revision of the prices and had
accepted in principle that there should be one uniform
retention price.
Dismissing the appeals, this Court,
HELD: {1) The fixation of Rs. 100 per tonne as the
uniform retention price for the entire industry with the
solitary exception of M/S Travancore Cement Ltd. for which
justification had been shown, was on a rational basis taking
into account all relevant data and factors including the
cement industry’s acceptance of the principle of a uniform
retention price for the entire industry, the only difference
being in the price actually fixed at Rs. 100 per tonne
instead of Rs. 104 per tonne claimed by the cement industry.
It is obvious, therefore, that the principle of a uniform
retention price for the entire industry had not been fault-
ed. [857H; 858A-B]
(2) The principle of fixation of a uniform price for the
industry was an accepted principle and this had to be done
by fixing the uniform price on the basis of the cost of a
reasonably efficient and economic representative cross-
section of manufacturing units and not with reference to the
cost in relation to each unit. [859A-B]
M/s. Shri Sitaram Sugar Company Limited & Anr. v. Union
of India & Ors. and U.P. State Sugar Corporation Ltd. & Anr.
v. Union of India & Ors., J.T. 1990 (1) SC 462, referred to.
(3) Fixation of a uniform retention price being clearly
permissible and the same having been determined at Rs. 100
per tonne on the basis of expert opinion, rounded on rele-
vant factors, there was no scope for interference within the
limits of permissible judicial review in the present case.
[859E]
Anakapalle Co-operative Agricultural & Industrial Socie-
ty Ltd. v. Union of India, [1973] 2 SCR 982 and The Panipat
Cooperative Sugar Mills v. Union of India, [1973] 2 SCR 860,
referred to.
(4) The Central Government’s power under Clause 12 of
the Cement Control Order, 1967 to refix the price can be
exercised ’having regard to any change in any of the factors
relevant for determination of price of cement’. The meaning
of the expression ’having regard to’ is well-settled. It
indicates that in exercising the power, regard must be had
also to the factors enumerated together with all factors
relevant for
852
exercise of that power. One such factor specified in Clause
12 is "such
(5) No material has been produced by the appellant to
show that M/s Chettinad Cement Corporation is a similar
substandard unit without any capacity for expansion, so that
it too must continue to be an uneconomic unit like M/s
Travancore Cement Ltd. deserving a similar treatment.
[860F-G]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 2 192/93
of 1972.
From the Judgment and Decree dated 23.4.1971 of the
Madras High Court in Writ Appeal Nos. 155 and 157 of 1970.
G.L. Sanghi, K. Parasaran, S. Krishnamurthy Iyer, K.K.
Venugopal, D.N. Mishra and Ms. Lira Goswami for the Appel-
lants.
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V.C. Mahajan, Gobind Das, N.L. Kakar, C.V. Subba Rao,
B.R. Aggarwala, T.C. Sharma, Mrs. Sushma Suri and Ms. Sushma
Manchanda for the Respondents.
The Judgment of the Court was delivered by
VERMA, J. Both these appeals are against the common
judgment of the Madras High Court (hereinafter referred to
as ’the High Court’) by a certificate under Article 133(1)
of the Constitution prior to its amendment. The appellants’
writ petitions were dismissed by a common judgment dated
18.12.1969 by a learned Single Judge of the High Court and
thereafter, the writ appeals were dismissed by a Division
Bench of the High Court on 23.4.1971. The grievance of the
appellants before us is, as it was in the High Court,
against the fixation of a uniform retention price in 1969 to
be paid to all producers for the cement produced by them and
acquired by the State Trading Corporation. In short, the
appellants’ grievance is that the fixation of a uniform
retention price for all producers in 1969 instead of three
different retention prices for different categories of
producers, as was done earlier, amounted to discrimination
contravening Article 14 of the Constitution.
The background in which the argument of discrimination
has to be tested may now be stated. Cement has been a con-
trolled com-
853
modity for a long time and its production, distribution and
price were regulated by Cement Control Orders issued by the
Central Government from time to time in exercise of the
powers conferred under the Industries (Development & Regula-
tion) Act, 1951. The arrangement made in 1856 was that the
entire quantity of cement produced by all producers was
acquired by the State Trading Corporation which distributed
it throughout the country at a uniform price on f.o.r.
basis. The price payable by the State Trading Corporation to
the producer was, however, the ’retention price’ or ’ex-
works’ or ’ex-factory price’ fixed by the Government. In
accordance with the recommendations of the First Tariff
Commission in 1958, the Central Government fixed f.o.r. and
ex-factory prices for a period of three years from July
1958, under the Cement Control Order, 1958. Even though the
consumer price was one uniform f.o.r. destination price,
there were different retention prices for cement relating to
the producers. In case of a new unit commencing production,
the Government fixed suitable retention price for it on the
basis of cost of production.
Pursuant to representation by the cement industry for
revision in the prices, the Second Tariff Commission was set
up by the Government to examine the question. The Tariff
Commission, after a comprehensive study, submitted its
report on 26.8.1961. In the report, it was noticed that
fixation of ex-works price for individual cement producers
had brought stagnation in the cement industry due to lack of
competition and incentive amongst producers to reduce the
cost of production, improve the operational efficiency and
increase the output. It was observed that instead of reward-
ing efficiency, it had promoted a tendency to inflate costs
which facilitated increase in the margin of profit to the
producer. The Tariff Commission ultimately grouped the
various units under three broad categories on the basis of
return on the capital employed. These were: the lowest cost
group, the high cost group, and those whose cost of produc-
tion was in between the other two groups. Accordingly, the
Tariff Commission recommended different retention prices for
the manufacturers of cement. The Government generally ac-
cepted the recommendations and passed the Cement Control
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Order, 1961, fixing three different retention prices for
three different groups of manufacturers. The Central Govern-
ment from time to time permitted increase in the retention
prices so fixed.
The Central Government decided on discontrol of cement
w.e.f. 1.1.1966, but the cement industry imposed a system of
self-regulation and set up an unofficial body known as
"Cement Allocation and
854
Coordinating Organisation". The cement was to be distributed
to consumers at uniform f.o.r. destination price all over
India. This price included a freight component. A cement
regulation account was also established to which a manufac-
turer would either contribute or draw from depending on the
actual freight incurred. This system was not found workable
and the Central Government decided to re-impose control. The
Cement Control Order, 1967 was passed under Section 18G and
Section 25 of the Industries (Development & Regulation) Act,
1951, to be effective from 1.1.1968. Under this Order, the
threetier retention price system was continued and the
retention prices fixed for the three groups were specified
in the Schedule as Rs.90.50, Rs.93.50 and Rs.96. Both the
appellants fell under the category for which the retention
price specified in the Schedule was Rs.96. Under this Cement
Control Order, the system of uniform consumer price was
preserved and freight equalisation was maintained by requir-
ing the manufacturer to either contribute or draw from the
cement regulation account set up under clause 9 of the
Order. The Cement Controller replaced the Cement Allocation
and Co-ordinating Organisation.
Pursuant to the representation made by various manufac-
turers, the Central Government enquired into the increase in
the cost of production since 1.1.1966. In consultation with
the concerned authorities, it was estimated that the weight-
ed average increase in the cost of production since 1.1.1966
was Rs7 per tonne. The Central Government then issued the
Cement Control (Amendment) Order, 1969 on 14.4.1969 effec-
tive from 16.4.1969 by which the Cement Control Order, 1967
was amended and in respect of all cement manufacturers,
except M/s. Travancore Cement Limited, Kottayam, a uniform
retention price of Rs. 100 per tonne was fixed.
The appellants filed writ petitions in the Madras High
Court challenging the fixation of a uniform retention price
of Rs. 100 per tonne in this manner on the ground that it
violated Articles 14 and 19(1)(g) of the Constitution. As
earlier stated, the challenge was rejected by a Single Judge
and thereafter, a Division Bench of the High Court, Hence,
these appeals by a certificate granted by the High Court
under the unamended Article 133(1) of the Constitution of
India,
The challenge before us in these appeals is based only
on Article 14 of the Constitution. Shri K. Parasaran,
learned counsel for the appellant in the Civil Appeal No.
2193 of 1972 (Chettinad Cement
855
Corporation Ltd. v. Union of India, contended that the
impugned Order made in 1969 fixing a uniform retention price
for all three categories of cement producers treats unequals
as equals. He argued that the fixation of three different
retention prices earlier was based on the Tariff Commis-
sion’s Report on the postulate that different .producers
were differently situated with different cost of production
and therefore, the fixation of different retention prices
for them was reasonable. He next contended that increase in
the cost of production being the real cause for re-fixation
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of a higher price, the exercise purports to be under Clause
12 of the Cement Control Order, 1967, which does not permit
fixation of the same price for all producers in spite of the
difference in their cost of production, particularly when
the Schedule to the order initially specified different
prices for them. He also contended that on the finding of
the High Court that the Chettinad Cement Corporation Ltd.
(appellant in Civil Appeal No. 2193 of 1972)--a newly born
unit in infancy--has suffered by this common treatment
because there are several features which distinguish the
Chettinad Cement Corporation Ltd. from the other units,
fixation of the same price for this appellant is discrimina-
tory, particularly when a distinction was made in the case
of M/s. Travancore Cement Ltd., Kottayam, for which a higher
retention price was fixed. Shri Parasaran, therefore, con-
tended that atleast in the case of this appellant, discrimi-
nation is proved on the basis of the High Court’s finding of
fact and a direction for re-fixation of a reasonable price
’for this appellant would be justified. Shri G.L. Sanghi,
learned counsel for the appellant in Civil Appeal No. 2192
of 1972, advanced a slightly modified argument. He too
referred to Clause 12 of the Cement Control Order, 1967 to
contend that fixation of one uniform retention price for all
producers is not permissible thereunder. He argued that the
increase of Rs.7 per tonne was to be made to the existing
three-tier retention prices, but an irrational basis was
adopted in fixing the uniform price of Rs. 100 per tonne
which results in an unequal increase to the three different
retention prices then existing. Both the learned counsel
contended that the result, therefore, is that whereas pro-
ducers for whom the retention price fixed earlier was
Rs.90.50 per tonne have got an increase of more than Rs.7,
the producers for whom the retention price was fixed at
Rs.96 per tonne have been given an increase of less than
Rs.7. It was, therefore, contended that fixation of the
uniform retention price of Rs. 100 per tonne in case of all
cement producers except M/s. Travancore Cement Ltd., Kotta-
yam, is discriminatory resulting in contravention of Article
14 of the Constitution.
To recapitulate, the arrangement in vogue from 1956 was that
856
the cement produced by all the producers was acquired by the
State Trading Corporation which distributed the commodity
throughout the country at a uniform price on f.o.r. destina-
tion basis. The price payable by the S.T.C. to the producers
was known as the ’retention price’ or ’ex-works’ or ’ex-
factory price’ at a uniform rate. On a representation by the
industry for revision of prices, the Government appointed
the Second Tariff Commission to go into the question. The
Tariff Commission, after a comprehensive review, submitted
its report on 26.8.1961, and recommended the fixation of
different retention prices for different groups of cement
producers. The Government generally accepted the recommenda-
tions of the Tariff Commission and fixed three different
retention prices which remained in vogue till fixation of a
uniform retention price by the impugned Order in 1969.
It may be mentioned that the fixation of three different
prices instead of one uniform retention price in the inter-
vening period was challenged before the Rajasthan High Court
on the ground that it was discriminatory, but that challenge
was rejected in Jaipur Udyog Ltd. v. Union of India, AIR
1969 Rajasthan 28 1.
Thereafter, the cement industry sought a further revi-
sion of the prices and the industry accepted in principle
that there should be one uniform retention price or ex-
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factory price in place of the three-tier system, though the
claim of the industry was that the uniform price be fixed at
Rs.96 instead of Rs.93. The real controversy, therefore,
between the cement industry and the Central Government was,
whether the addition of Rs.7 per tonne for fixation of a
uniform retention price should be made to the sum of Rs.96
or to Rs.93. In other words, if the uniform retention price
were fixed at Rs. 104 per tonne instead of Rs. 100 per
tonne, there was no grievance to anyone in the cement indus-
try against fixation of the uniform retention price. Even at
the hearing before us, in reply to this specific query by
us, learned counsel for the appellants did not dispute that
no grievance would survive to the appellants if the uniform
retention price was fixed at Rs. 104 per tonne instead of
Rs. 100 per tonne. In substance, the grievance of both the
appellants, therefore, is only to this extent and the argu-
ment of discrimination has been advanced for this purpose.
In the counter-affidavit filed on behalf of the Central
Government, the manner in which the uniform retention price
for the industry was fixed at Rs. 100 per tonne has been
elaborately explained. A portion of the counter-affidavit,
relied on by the High Court also, is as under:
857
"The question of introduction of a uniform price for the
entire industry had been under consideration from time to
time since 1961. The opportunity of the request of the
industry for an upward revision of their retention price due
to increase in cost of production as a result of Governmen-
tal actions since 1.1.1966, was availed of to consider
whether it was not opportune to introduce finally a uniform
price for the entire industry as a Whole. In view of the
observations of the Tariff Commission in 1961 that econo-
mies were possible with better management control and that
the industry should make every effort to reduce its cost of
production in future and the time elapsed since 196 1 it was
felt that the additional price granted to the industry in
196 1, need not any longer be continued. The weighted aver-
age increase in the cost of production as a result of Gov-
ernmental actions since 1.1.1966, was determined in consul-
tation with the Chief Cost Accounts Officer as Rs.7 per
tonne. The uniform price thus works out to Rs.90.50 per
tome, i.e. Rs.69.50 per tonne prescribed in ’1961 together
with subsequent increases amounting in all to Rs.21. The
weighted average retention price on the basis of three
different retention prices amounted to Rs.93 per tonne. The
uniform price for the industry was thus fixed at Rs. 100
i.e. Rs.93 per tonne, the weighted average of the three
retention prices on the basis of actual production plus Rs.7
per tonne, as a result of the increase in the cost of pro-
duction due to Governmental actions since 1.1.1966. The
fixation of a uniform retention price does not therefore
involve any inequality or arbitrariness. It is denied that
the Cement Control (Amendment) Order, 1969, has introduced
any unfair and arbitrary inequality among the various pro-
ducers and would cause considerable loss to the petitioner
or would amount to an unjust and arbitrary discrimination
violative of Article 14 or 19(1)(g) of the Constitution of
India."
The assertion in the counter-affidavit of the Government
is that the industry was itself in favour of a single uni-
form retention price which was taken into account by the
Government in fixing the uniform price. This was not rebut-
ted by the appellants. The High Court has rightly relied on
this fact. It is, therefore, clear that the fixation of Rs.
100 per tonne as the uniform retention price for the entire
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industry with the solitary exception of M/s. Travancore
Cement Ltd., Kotta-
858
yam, for which justification has been shown, was on a ra-
tional basis taking into account all relevant data and
factors including the cement industry’s acceptance of the
principle of a uniform retention price for the entire indus-
try, the only difference being in the price, actually fixed
at Rs. 100 per tonne instead of Rs. 104 per tonne claimed by
the cement industry. It is obvious that the fixation at Rs.
100 per tonne being shows to be made on a principle which
has not been faulted, the actual fixation at Rs. 100 instead
of Rs. 104 to be received by the industry is not within the
domain of permissible judicial review if the principle of a
uniform retention price for the entire industry cannot be
faulted,
The principles of price fixation permitting the fixation
of a uniform price for the entire industry are no longer
debatable after the recent decision of a Constitution Bench
in M/s, Shri Sitaram Sugar Company Limited & Anr. v. Union
of India & Ors., and U.P. Stale Sugar Corporation Ltd. &
Anr. v. Union of India & Ors., JT 1990 (1) SC 462 even if
the same were debatable when the controversy arose in the
present case. In this decision, the Constitution Bench while
affirming the earlier decisions of this Court in Anakapalle
Co-operative Agricultural & Industrial Society Ltd. etc.
etc. v. Union of India & Ors., [1973] 2 SCR 882 and The
Panipat Cooperative Sugar Mills v. Union of India, [1973] 2
SCR 860 reiterated the settled principles. It was pointed
out that what is best for the industry and in what manner
the policy should be formulated and implemented, bearing in
mind the object of supply and equitable distribution of the
commodity at a fair price in the best interest of the gener-
al public, is a matter for decision exclusively within the
province of the Central Government and such matters do not
ordinarily attract the power of judicial review. It was also
held that even if some persons are at a disadvantage and
have suffered losses on account of the formulation and
implementation of the Government policy, that is not by
itself sufficient ground for interference with the Govern-
mental action. Rejection of the principle of fixation of
price unitwise on actual cost basis of each unit was reiter-
ated and it was pointed out that such a policy promotes
efficiency and provides an incentive to cut down the cost
introducing an element of healthy competition among the
units. Similarly, the criticism against the principle of
weighted average adopted in fixation of price was rejected
as baseless. It is obvious that even if there be no price
control, the uneconomic units would be at a great disadvan-
tage and, therefore, the position should not be different
for the purpose of price fixation. The "cost-plus" price
fixation perpetuates inefficiency in the industry and is
against the long-term interest of the country. It was held
"that
859
price, ..... , is to be arrived at by a process of cost-
ing with reference to a reasonably efficient and economic
representative cross-section of manufacturing units." It is,
therefore, clear that the principle of fixation of a uniform
price for the industry is an accepted principle and this has
to be done by fixing a uniform price on the basis of the
cost of a reasonably efficient and economic representative
cross-section of manufacturing units and not with reference
to the cost in relation to each unit. Obviously, such a
practice is in larger public interest and also promotes
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efficiency in the industry providing an incentive to the
uneconomic units to achieve efficiency and to reduce their
cost. In the same decision, the permitted scope of judicial
review was summarised as under:
"The true position, therefore, is that any act of the repos-
itory of power, whether legislative or administrative or
quasi-judicial, is open to challenge if it is in conflict
with the Constitution or the governing Act or the general
principles of the law of the land or it is so arbitrary or
unreasonable that no fair minded authority could ever have
made it."
In the present case, we find that the fixation of the
uniform retention price at Rs. 100 per tonne is based on the
weighted average increase of Rs.7 in the cost of production
and the weighted average retention price on the basis of
three different retention prices determined at Rs.93 per
tonne on the basis of expert opinion. Fixation of a uniform
retention price being clearly permissible and the same
having been determined at Rs. 100 per tonne on the basis of
expert opinion, rounded on relevant factors, there is no
scope for interference within the limits of permissible
judicial review in the present case.
A brief reference to Clause 12 of the Cement Control
Order, 1967 may also be made. Clause 12 reads as under:
"12. POWER TO VARY THE PRICES AND TO ALTER THE SCHEDULE
. The Central Government may, having regard to any
change in any of the factors relevant for the price of
cement, such as an increase or decrease in the cost of
production or distribution, by notification in the Official
Gazette, vary the price fixed in this Order or alter the
Schedule to this Order as appear to it to be necessary."
860
We are unable to appreciate how Clause 12 in any manner
restricts the Central Government’s power to fix a uniform
retention price for all the units specified in the Schedule
to the Order, even though different prices were specified in
the Schedule as initially enacted. The Central Government’s
power to refix the price can be exercised ’having regard to
any change in any of the factors relevant for determination
of price of cement’. The meaning of the expression ’having
regard to’ is wellsettled. It indicates that in exercising
the power, regard must be had also to the factors enumerated
together with all factors relevant for exercise of that
power. Once such factor specified in Clause 12 is "such as
an increase or decrease in the cost of production or distri-
bution". Admittedly, the fixation of the uniform retention
price at Rs. I00 per tonne was made on the industry’s demand
for revision of the price as a result of increase in the
cost of production, the only dispute between the industry
and the Central Government being with regard to the extent
of increase and not to the effect of increase or the mode of
increase by fixation of a uniform price. It is, therefore,
difficult to appreciate the support that the learned counsel
for the appellants seek from Clause 12.
The only surviving question for consideration is the
argument in Civil Appeal No. 2 193 of 1972 for a differen-
tial treatment to the appellant, M/s. Chettinad Cement
Corporation Limited, on the analogy of M/s. Travancore
Cement Limited, Kottayam. In the counter-affidavit of Shri
G. Ramanathan, Under Secretary to the Government of India,
the reason for treating Travancore Cement Limited different-
ly has been clearly stated. It has been stated that it is a
sub-standard unit with a capacity of 50000 tonnes per annum
only without any scope for expansion while the standard
capacity for a unit is two lakh tonnes per annum; so that
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this unit is not capable of expanding the capacity and it is
on the whole an uneconomic unit deserving a special consid-
eration. No material has been produced by the appellant,
M/s. Chettinad Cement Corporation Limited, to show that it
is a similar sub-standard unit without any capacity for
expansion, so that it too must continue to be an uneconomic
unit like M/s. Travancore Cement Limited, Kottayam deserving
a similar treatment. The counter-affidavit, therefore, shows
a rational basis for classifying M/s. Travancore Cement
Limited, Kottayam, differently as a sub-standard and an
uneconomic unit without any scope for improvement in com-
parison to other units. This argument also is untenable.
As a result of the aforesaid discussion, we do not find
merit in
861
any of the contentions advanced in support of these appeals
to support the challenge on the basis of Article 14 of the
Constitution to the fixation of a uniform retention price of
Rs. 100 per tonne in 1969 by the impugned Order or to the
practice of a uniform retention price being followed upto
1979.
These appeals are accordingly dismissed. In the circum-
stances of the case, the parties shall bear their own costs.
R.S.S. Appeals dismissed.
862