Laxmi Khandsari Vs. State of U.P.
& Ors [1981] INSC 57 (9 March 1981)
FAZALALI, SYED MURTAZA FAZALALI, SYED MURTAZA
KOSHAL, A.D.
CITATION: 1981 AIR 873 1981 SCR (3) 92 1981
SCC (2) 600 1981 SCALE (1)455
CITATOR INFO :
F 1987 SC1867 (6)
ACT:
Essential Commodities Act 1955, S. 3 and
Sugarcane (Control) Order 1966, Clause 8-Notification by Cane
Commissioner-Imposition of a ban for a month and half on operation of power
crushers of Khandsari units in reserved area of mill-Validity of-Exemption in
favour of vertical power crushers-Whether discriminatory and justified.
HEADNOTE:
In the State of Uttar Pradesh, sugarcane was
produced by the sugar mills through the 'hydraulic process' and by the power
crushers through the 'open pan process'. Both the mills as also the crushers
drew their raw material, namely sugarcane from sugarcane growers. In order to
facilitate production by the sugar mills, most of which were controlled by the
State, reserved area of the fields growing sugarcane was fixed throughout the
State.
With a view to removing nation-wide shortage
of sugar, enhancing sugar production and achieving an equitable distribution of
the commodity so as to make it available to consumers at reasonable rates, the
Cane Commissioner in exercise of the powers conferred under clause (8) of the
Sugarcane (Control) Order, 1966 issued a notification dated 9th October, 1980
which directed that no power crusher other than vertical power crushers manufacturing
gur or rab from sugarcane grown on their own fields or a Khandsari unit or any
agent of such owner in the reserved area of a mill could be worked until
December 1, 1980.
The petitioners who were owners of power
crushers of Khandsari units and had taken out regular licences under the Uttar
Pradesh Khandsari Sugar Manufacturers Licensing Order 1967, assailed the
notification which limited the ban to work power crushers for a period of one
month and a half i.e. from October 9. 1980 to December 1, 1980 in writ
petitions to this Court. They contended: (1) The notification, as also the
Control Order under which it was passed are violative of Article 19(1)(g) and
the restrictions contained therein do not contain the quality of
reasonableness. (2) Clause 8 of the Control Order under which the notification
had been issued suffers from the vice of excessive delegation of powers and is,
therefore, violative of Article 14 of the Constitution. The Notification seeks
to establish a monopoly in favour of the sugar mills at the cost of the
petitioners, and must be struck down as being violative of Article 14. (3)
There is no rational nexus between the prohibition contained in the
Notification preventing the crushers of petitioners from working them and the
object sought to be achieved by it. (4) Clause 8 of the Control Order does not
contemplate a complete prohibition of the production of an article but
envisages only a regulation of the period of hours of working. (5) The
Notification violates the principles of natural justice inasmuch as it was
passed without hearing the petitioners whose rights were curtailed as they were
put completely out of production. (6) The impugned Notification by imposing a
prohibition against the working of the power crushers amounts to a partial
revocation of the licences granted to the petitioners under clause 3 of the 93
Licensing Order and is, therefore violative of clause 11.
(7) The impugned Notification goes against
the very spirit and object of the Act of 1955 and in fact, frustrates the equal
distribution and production of sugar which was the objective of the
Notification.
On behalf of the respondent-State it was
submitted that: (1) an order passed under clause 8 of the Control Order is of a
legislative character and therefore the question of the application of the
principles of natural justice, does not arise. (2) The notification does not
violate Article 14 or Article 19 because it is in public interest and aimed at
maintaining and securing proper and equitable distribution of sugar. (3) The
Notification is justified by the fact that the recovery of sugar from sugarcane
in case of Khandsari units run by power crushers is between 4 to 6 per cent
whereas in the case of sugar factories it ranges between 9-1/2 to 11-1/2 per
cent, so that utilisation of sugarcane in the case of mills is double of that
of the power crusher. (4) The Khandsari produced by the crushers has got a very
narrow sphere of consumption as it is used mostly by halwais or villagers,
whereas sugar produced by the sugar mills is consumed in far larger quantities
by the public. The action taken in order to protect national interest and
distribution of sugar to the entire country on rational basis cannot be said to
be an unreasonable restriction. (5) There is a marked difference between the
quality of Khandsari and that of sugar produced by the mills in their
character, specification, etc. (6) The question of natural justice does not
arise because the crusher owners were fully aware of the situation and had also
knowledge of the considerations which prevailed with the Government in stopping
crushers for a short period in order to boost production by the sugar mills and
fix support price for the sugarcane supplied to the mills. (7) Clause 8 of the
Control Order uses the words period or working hours' which are wide enough to
embrace within their ambit a fixed period of time covering more than a day as
also hours of work on any working day.
Dismissing the writ petitions and appeals,
HELD: The impugned Notification cannot be
said to contain the quality of unreasonableness but is per se fair and
reasonable. In so far as the word 'vertical' used in the Notification is
concerned, it must be struck down as being violative of Article 14. This,
however, does not render the entire Notification void because the word
'vertical' is clearly severable from the other portions of the Notification.
All that has to be done is to read the Notification void because the word
'vertical' as a result of which the exemptions from the ban will include all
owners of power crushers whether vertical or horizontal which manufacture Gur
or rab from sugarcane grown on their fields.
As the Notification has already spent its
force, if any order is passed in future, the Government will see that such an
invidious discrimination is not repeated. [134F; 124H- 125B] 1(i) Where a
citizen complains of the violation of fundamental rights contained in any of
sub-clauses (a) to (g) of Article 19 the onus is on the State to prove or
justify that the restraint or restrictions imposed on the fundamental rights
under clauses 2 to 6 of the Article are reasonable. [104 C] Saghir Ahmed v. The
State of U.P. and Ors. [1955] 1 S.C.R. 707 and Mohammed Faruk v. State of
Madhya Pradesh and Ors. [1959] 1 S.C.C. 853.
94 (ii) Fundamental rights enshrined in Part
III of the Constitution are neither absolute nor unlimited but are subject to
reasonable restrictions which may be imposed by the State in public interest
under clauses 2 to 6 of Article
19. What are reasonable restrictions would
naturally depend on the nature and circumstances of the case, the character of
the statute, the object which it seeks to serve, the existing circumstances,
the extent of the evil sought to be remedied as also the nature of restraint or
restriction placed on the rights of the citizen. No hard or fast rule of
universal application can be laid down, but if the restriction imposed appear
to be consistent with the Directive Principles of State Policy they would have
to be upheld as the same would be in public interest and manifestly reasonable.
[105D-E, G] (iii) Restrictions may be partial, complete, permanent or temporary
but they must bear a close nexus with the object in the interest of which they
are imposed. Sometimes even a complete prohibition of the fundamental right to
trade may be upheld if the commodity in which the trade is carried on is
essential to the life of the community and the said restriction has been
imposed for limited period in order to achieve the goal. Freezing of stocks of
food-grains in order to secure equitable distribution and availability on fair
prices have been held to be a reasonable restriction. [105-106A, C] Narendra
Kumar and Ors. v. The Union of India and Ors.
[1960] 2 S.C.R. 375, M/s. Diwan Sugar and
General Mills (P) Ltd. and Ors. v. The Union of India, [1959] 2 Supp. S.C.R.123
and The State of Rajsthan v. Nath Mal and Mitha Mal, [1954] S.C.R. 982 referred
to.
(iv) In determining the reasonableness of
restrictions imposed by law in the field of industry, trade or commerce, the
mere fact that some of the persons engaged in a particular trade may incur loss
due to the imposition of restrictions will not render them unreasonable because
it is manifest that trade and industry pass through periods of prosperity and
adversity on account of economic, social or political factors. In a free
economy, controls have to be introduced to ensure availability of consumer
goods, like food-stuffs, cloth or the like at a fair price and the fixation of
such a price cannot be said to be an unreasonable restriction. [107-A-B] (v)
Where restrictions are imposed on a citizen carrying on a trade or commerce in
an essential commodity, the aspect of controlled economy and fair and equitable
distribution to the consumer at a reasonable price leaving an appreciable
margin of profit to the producer is undoubtedly a consideration which does not
make the restriction unreasonable. [107 C] State of Madras v. V.G. Row, [1960]
2 S.C.R. 375, Mineral Development Ltd. v. The State of Bihar and Anr., [1960] 2
S.C.R. 609, Collector of Customs, Madras v. Nathella Sampathu Chetty and Anr.
[1962]3 S.C.R. 786 and M/s. Diwan Sugar and General Mills (P.) Ltd. and Ors. v.
U.O.I. [1959] 2 Supp. S.C.R. 123 referred to.
(vi) A restriction on the right of a trader
dealing in essential commodities, or fixation of prices aimed at bringing about
distribution of essential commodities keeping the consumers interests as the
prime consideration cannot be regarded as unreasonable. [110 C] In the instant
case, the Petitioners by rushing to Court the moment the Notification was
issued, deprived the State as also themselves of the actual con- 95 sequences
of the notification and the prejudice which it really may have caused. They did
not at all show any patience in waiting for a while to find out if the
experiment functioned successfully and in the long run paid good dividends. As
the petitioners obtained stay orders the experiment died a natural death and
the Notification remained ineffective. [111D-E] Prag Ice and Oil Mills and Anr.
etc. v. Union of India, [1978] 3 S.C.R. 293, referred to.
(vii) In the case of essential commodities
like sugar the question of the economic production and distribution thereof
must enter the verdict of the Court in deciding the reasonableness of the restrictions.
In such cases even if the margin of profit left to the procedure is slashed
that would not make the restriction unreasonable. The reason is that such a
trade or commerce is subject to rise and fall in prices and other diverse
factors, and if any measure is taken to strike a just balance between the
danger sought to be averted and the temporary deprivation of the right of a
citizen to carry on his trade, it will have to be upheld as reasonable
restriction. [112 G-113A] Shree Meenakshi Mills Ltd. v. U.O.I. [1974] 2 S.C.R.
398 and Saraswati Industrial Syndicate Ltd.
v. U.O.I.[1975] 1 S.C.R. 956 referred to.
(viii) The restriction imposed by the
Notification in stopping the crushers for the period 10th October to 1st
December, 1980 is in public interest and bears a reasonable nexus to the object
which is sought to be achieved, namely, to reduce shortage of sugar and ensure
a more equitable distribution of this commodity. Taking an overall picture of
the history of sugar production it cannot be said that the stoppage of sugar
crushers for a short period is more excessive than the situation demanded.
Madhya Bharat Cotton Association Ltd. v.
Union of India and Anr. A.I.R. 1954 S.C. 634 referred to.
2(i) The Control Order has been passed under
the authority of section 3 of the Act of 1955 which has been held to be
constitutionally valid and not in any way discriminatory so as to attract
Article 14. The Control Order itself contains sufficient guidelines, checks and
balances to prevent any misuse or abuse of the power. The Central Government
under clause 8 on whom the power is conferred is undoubtedly a very high
authority who must be presumed to act in a just and reasonable manner. [119
E-F] Chinta Lingam and Ors. v. Government of India and Ors.
[1971] 2 S.C.R. 871 and V.C. Shukla v. State
(Delhi Admn.), [1980] 3 S.C.R. 500.
(ii) There was no question of creating any
monopoly to benefit the mills. A very large majority of the mills were
controlled by the State or co-operative societies and only a small fraction of
them were working in the private sector.
In view of the low working cost of the
crushers they sought to outcompete the mills and deprive them of the requisite
amount of sugarcane which they should have got. It was not only just but also
essential to boost the production of the factories so that while sugar may be
produced on a large scale and sugarcane may not be wasted which would have been
the case if most of the sugarcane went 96 to the crusher. The recovery of
sugarcane juice by the mills is double that by the crushers and if the latter
were allowed to operate the wastage would have been almost 50 per cent which
could have been avoided if sugarcane was allowed to be utilised by the mills.
[121 E-G] (iii) If in the larger public interest it becomes necessary to compel
the sugarcane growers to supply sugarcane to the mills at a particular rate in
order to meet a national crisis, no person can be heard to say that his rights
are taken away in an unjust or discriminatory fashion. Personal or individual
interests must yield to the larger interests of community. This was the
philosophy behind the passing of the Act of 1955. [123 F-G]
3. It has not been proved that there is any
real distinction between a vertical and a horizontal power crusher. Both are
regarded as falling in the same class. The Notification by exempting vertical
power crushers and prohibiting horizontal power crushers is clearly
discriminatory and the discrimination is not justified by any rational nexus
between the prohibition and the object sought to be achieved. [124 G]
4. (i) Clause 8 used the words 'period or
hours to be worked'. A plain reading of this expression reveals that the words
'period' and 'hours' have been used to connote to different aspects. Clause 8
contemplates regulation of working of the sugar by two separate methods-(1)
Where only hours of work per day are to be regulated or fixed, and (2) the word
'period' which has nothing to do with the hours to be worked but it refers to
another category of regulation, namely, whether a crusher is to run or not for
a particular period of time. [125 D-E] In the instant case, the Notification
has resorted to the first category, viz. the 'period' of the working of the
crushers, that is about one and a half month, and has not at all touched or
impinged upon the working hours of the crushers. If, however, the notification
had fixed certain hours of the day during which only the crushers could work,
then the Notification would have resorted to the alternative mode of
regulation, which obviously has not been done. The impugned Notification is,
therefore, wholly consistent with the provisions contained in clause 8 of the
Control Order.
[125 G-126A]
5. (i) Two prominent features exclude the
rules of natural justice in the instant case. Section 3 of the Act of 1955
under which the Control Order was passed really covers an emergent situation so
as to meet a national crisis, involving the availability or distribution of any
essential commodity which may make it necessary to restrict or control the
business carried on by a citizen. There was an acute shortage of sugar which
was not made available to consumers at reasonable rates and the situation
caused serious dissatisfaction among the people. Nothing short of immediate and
emergent measures taken to solve this crisis would have eased out the
situation. If hearing was to be given to so many owners of power crushers, it
would have completely defeated and frustrated the very object not only of the
Notification but also of the Act of 1955 and created complications which may
have resulted in a further deterioration of an already serious situation. If
the rules of natural justice were not applied in such an emergent case, the
petitioners cannot be heard to complain. Afterall, the Notification directed
stoppage of operation only for a very short period and the petitioners would
have had an opportunity of recouping their loss after they were allowed to
function because the proportion of consumption of Khandsari Sugar was limited.
97 The petitioners were, therefore, not
seriously prejudiced but have rushed to this Court rather prematurely. [128
B-C;
F-129 A] Mohinder Singh Gill and Anr. v. The
Chief Election Commissioner, New Delhi and Ors. [1978] 2 S.C.R. 272, Maneka
Gandhi v. U.O.I. [1978] 2 S.C.R. 621, S.L. Kapoor v. Jagmohan, [1980] 4 S.C.C.
379 and Prag Ice and Oil Mills and Anr. v. U.O.I. [1978] 3 S.C.R. 293, referred
to.
(ii) The impugned Notification is a
legislative measure. The rules of natural justice therefore stand completely
excluded and no question of hearing arises. The passing of the notification was
a trial and error method adopted to deal with a very serious problem. [129 G-H,
130 F] Chairman, Board of Mining Examination and Anr. v. Ramjee, [1977] 2
S.C.R. 904, Joseph Beauhernais v. People of the State of Illinois, 96 L.ed. 919
at 930 and Bates v. Lord Hailsham of St. Marylebone and Ors. [1972] 1 W.L.R.
1373; at 1378 referred to.
6. A revocation of licence means that the
licence has not been suspended but cancelled for all times to come entailing
civil consequences and complete abolition of the right for the exercise of
which the licence was granted. A temporary suspension of the working of the
crushers owned by the petitioners cannot amount to a revocation, either
complete or partial. The proviso to sub-clause (2) of clause 11 of the Control
Order does not at all envisage a partial or periodical revocation of a licence.
The proviso comes into play only if a licence is revoked or cancelled once for
all. The proviso is wholly inapplicable to the facts of the instant case. [132
C-D] State of Maharashtra v. Mumbai Upnagar Gramodyog Sangh, [1969] 2 S.C.R.
392.
7. The Notification ex-facie cannot be said
to have been passed without due care and deliberation. The impugned
Notification having been passed under section 3 of the Act it fulfils all the
conditions contained therein, viz. it is expedient for maintaining or
increasing the supply of an essential commodity, namely sugar which is included
in clause (e) of the section 3 of the Act of 1955 and it regulates the supply
and distribution of the essential commodities of the trade and commerce.
Neither the Control Order nor the impugned Notification is against the tenor
and spirit of section 3. It is manifestly clear from the circumstances disclosed
that it is in pursuance of the aim and object for which section 3 was enshrined
in the Act of 1955 that the Control Order and the Notification were
promulgated. [133E; H-134 C]
8. In case Government decides to impose a ban
in future on the power crushers or other units, a bare minimum hearing not to
all the owners of Khandsari units but to only one representative of the
Association representing them, and getting their views, would help the
Government in formulating its policy. Even if an emergent situation arises, a
representation against the proposed action may be called for from such
Association and considered after giving the shortest possible notice. [135A-B]
9. Whenever any steps for banning production
is taken, the Government has to evolve some procedure to detect the defaulters
and ensure compliance of the baning order. [136 C] 98
ORIGINAL JURISDICTION: Writ Petitions Nos.
5637- 41,5643-45, 5646-47,5649-51, 5597-98,5553-67,5609-11,5516-
20,5623-28,5657, 5673-74,5702-23,5668, 5659-67,5733, 5740- 42, 5782-84,
5763-64, 5762,5747-52,5779-81,5745, 5785, 5737- 39, 5841-43, 5786-5797, 5861-62
and 5863-64 of 1980.
(Under Article 32 of the Constitution.) AND
Civil Appeal No. 2734 of 1980.
Appeal by special leave from the Judgment and
Order dated 12.11.1980 of the Allahabad High Court in W.P.No. 3115/80.
R.A. Gupta for the Petitioners in
WPs.5637-41/80, 5797,5733/80 and CA No.2734/80.
A.P.S. Chauhan, Roopendra Singh Gajraj Singh,
and C.K. Ratnaparkhi for the Petitioners in WP 5762/80.
B.S. Chauhan, Birj Bihari Singh Sridhar for
the Petitioner in WP 5745/80.
Rameshwar Dial and Sarwa Mitter for the
Petitioners in WPs 5782-84/80 R.K. Garg, S.N. Kacker, R.K. Jain and R.P. Singh
for the Petitioners in WPs 5553-5567, 5616-5620, 5646, 5647, 5750-52, 5779-81,5623-28,5646-47,
5649-5651,5643-45,5702 to 5723, 5673-5674,5659 to 5667,5740-42, 5737-39 and
5841- 43/80.
R.P. Singh for the Petitioners in WPs 5609-11
& 5597- 98/80.
Soli J.Sorabjee, Arvind Minocha and Mrs.
Veena Minocha for the Petitioners in WP 5661/70.
Mohan Behari Lal for the Petitioners in WPs
5785/80, 5786/80, and 5657/80.
A.K. Gupta for the Petitioners in WPs
5763-64/80.
Lal Narain Sinha Att. Genl., S.C. Maheshwari
Addl.
Advocate General (U.P.), O.P. Rana,
Mrs.Shobha Dikshit for the Respondents in all the matters.
The Judgment of the Court was delivered by,
FAZAL ALI, J. Inspired by the objective of removing nation-wide shortage of
sugar and for the purpose of enhancing sugar production 99 in order to achieve
an equitable distribution of the commodity so as to make it available to
consumers at reasonable rates and thereby relieving the sugar famine, the Cane
Commissioner, Government of Uttar Pradesh by virtue of a Notification dated 9th
October, 1980, acting under clause 8 of the Sugarcane (Control) Order, 1966
(hereinafter referred to as the 'Control Order') directed that no power
crusher, with certain exceptions, of a khandsari unit or any agent of such
owner in the reserved area of a mill could be worked until December 1, 1980.
The exact contents of the Notification may be extracted thus:
"Lucknow, Thursday 9th October 1980 In
exercise of the powers under clause 8 of the Sugarcane (Control) Order, 1966
read with the Central Government, Ministry of Food & Agriculture, Community
Development and Cooperation (Department of Food), Government of India Order No.
GSR 122/Ess. Comm/Sugarcane dated July 16, 1966, I, Bhola Nath Tiwari, Cane
Commissioner, Uttar Pradesh hereby direct that no owner of power Crusher (other
than those vertical power crushers which manufacture Gur or Rab from Sugarcane
grown on their own fields) or a Khandsari Unit or any agent of such owner shall
in any reserved area, of any Sugar Mill work the Power Crusher, or the
Khandsari Unit prior to December 1, 1980 during the Year 1980-81.
By Order Bhola Nath Tiwari Cane Commissioner
Uttar Pradesh" The Control Order was passed by the Central Government in
exercise of the powers conferred on it by s.3 of the Essential Commodities Act,
1955 (hereinafter referred to as the 'Act of 1955'). In order to understand the
contentions raised by the parties it may be necessary to analyse the prominent
features of the above Notification with reference to the situation it was
intended to meet.
It is not disputed that sugar was being
produced in the State of U.P. by the sugar mills through hydraulic process and
by the power crushers through what is known as the 'open pan process'. Both the
mills as also the crushers drew their raw material, namely, sugarcane, from the
sugarcane growers.
In order to facilitate production by the
sugar mills, most of who were controlled by the State, a reserved area of the
fields growing sugarcane was fixed throughout the State 100 The Notification
applied only to the reserved areas of a mill and not to any other areas. In
other words, any area which fell outside the reserved area was not affected by
the Notification and the power crushers situated in that area could still
manufacture Khandsari by the open pan process.
Thus, it would be seen that the ban imposed by
the notification was confined only to a particular area in the State of U.P.
Secondly, the Notification limited the ban to
work power crushers only to a short period of one month and a half i.e., from
October 9, 1980 to December 1, 1980.
Thirdly, (and it has also not been disputed)
the owners of power crushers of khandsari units, who are the petitioners in
these cases, had taken out regular licences under the U.P. Khandsari Sugar
Manufacturers Licensing Order of 1967 (hereinafter referred to as the 'Licensing
Order'). It, therefore, logically follows that the power crushers owned or
worked by the conditions of the licences under which they were working the
crushers. Fourthly, what was prohibited by the Notification was only the
manufacture of khandsari while the production of gur or rab from sugarcane
grown in the fields belonging to the owners of the crushers was left out of the
ambit of the Notification.
We have mentioned these essential features of
the Notification because the most important argument put forward before us by
the counsel for the petitioners has been that it imposes unreasonable
restrictions on the right of the petitioners under Art. 19(1)(g) of the
Constitution to carry on their trade namely, production of khandsari. A
subsidiary argument buttressing the main contention was that the Notification
intends to create a monopoly in favour of the sugar mills at the cost of the
crushers owned by the petitioners and is, therefore, clearly violative not only
of Art. 19(1)(g) but also of Art. 14 of the Constitution. We would, however,
deal with this aspect of the matter when we examine the contentions raised by
the counsel for the parties.
The Attorney-General, appearing for the Union
of India, and Mr. Maheshwari, Additional Advocate-General appearing for the
State of U.P., contended that, decision to ban the power crushers of the
petitioners was taken as a part of a high powered policy to boost the
production of sugar which had fallen during the year 1979-80 with the result
that in the current year the country faced a great sugar famine. As the
situation called for some positive action to increase the production, the
matter having been discussed at the 34th Annual Convention of 101 Sugar
Technologists of India, it was decided to ban the production of khandsari by
the power crushers for a limited period.
A large number of documents in the nature of
affidavits, counter- affidavits, reports and books have been filed by the
counsel for both the parties in support of their respective contentions. We might
also mention here that the Notification has since spent its force and, in fact,
was not carried into effect because immediately after it was issued the present
writ petitions were filed in this Court and the petitioners obtained stay of
the operation of the Notification from this Court. The Attorney-General,
however, insisted that the matter should be finally decided so that if the
Central Government wants to take any steps of this kind in future it may be
aware of the correct constitutional or legal position. The petitioners also
insisted that the constitutional and legal questions involved in these cases
may be decided even though our decision may be more or less of an academic
value.
This brings us now to the various contentions
raised by counsel for the petitioners and the respondents. As the Notification
has already spent its force, we propose to deal only with the important and
relevant contentions that have been advanced before us.
The counsel for the petitioners headed by Mr.
Garg, Mr. Mridul and others raised the following constitutional points before
us :- (1) The Notification, as also the Control Order under which it was passed
are clearly violative of of Art. 19(1)(g) and the restrictions purported to be
placed on the right of the petitioners not do contain the quality of
reasonableness.
(2) Clause 8 of the Control Order under which
the impugned Notification has been issued suffers from the vice of excessive
delegation of powers and is, therefore, violative of Article 14 of the
Constitution.
By the same token, as the impugned
Notification seeks to establish a monopoly in favour of the sugar mills at the
cost of the petitioners, invidious discrimination is writ large on the very
face of the Notification which must be struck down as being violative of Art.
(3) There is absolutely no rational nexus
between the prohibition contained in the Notification preventing the crushers
of the petitioners from working them and the object sought to be achieved by
it. Thus, the State had selected the petitioners for hostile discrimination
between one segment 102 and another of persons engaged in the purchase of
sugarcane, its sale and production of sugar without striking a just balance
between the manufacturers of gur, khandsari and sugar. India lives in villages
and it was not understandable why the Central Government was bent on reducing
the support price of sugarcane which was adversely affecting the sugarcane
growers because while the mills were not able to pay a reasonable price the
crushers were able to pay a handsome price for the sugarcane supplied to them
by the growers. When tested for reasonableness, therefore, the Notification
completely fails.
(4) Clause 8 of the Control Order does not
contemplate a complete prohibition of the production of an article but
envisages only a regulation of the period or hours of working.
(5) The Notification violates the principles
of natural justice inasmuch as it was passed without hearing the petitioners
whose valuable rights were curtailed as they were put completely out of
production even though for a short period.
(6) The impugned Notification violative of
clause 11 of the Control Order itself inasmuch as the prohibition against the
working of the power crushers amounts to partial revocation of the licences of
the petitioners granted to them under clause 3 of the Licensing Order. Clause
11 of the Control Order clearly provides that no adverse orders could be passed
against any manufacturer without hearing him.
(7) Even though the impugned Notification
purports to have been passed under the Control Order which itself was passed
under s. 3 of the Act of 1955 yet if the notification is properly considered
and the mischief it causes is borne in mind, it goes against the very spirt and
object of the Act of 1955 and, in fact, frustrates the equal distribution and
production of sugar which apparently seems to be the objective of the impugned
notification.
The Attorney-General and the Additional
Advocate General appearing for the Union of India and the State of U.P.
respectively countered the submissions made by the petitioners on the following
grounds:
(1) An order passed under clause 8 of the
Control Order is of a legislative character and therefore the question of the
103 application of the principles of natural justice to it does not arise.
(2) The Notification does not violate Art. 14
or 19 because it is in great public interest and is aimed at maintaining and
securing proper and equitable distribution of sugar in view of the nation wide
shortage of the commodity.
(3) The Notification is justified by the fact
that recovery of sugar from sugarcane in case of khandsari units run by power
crushers is between 4 to 6 per cent whereas in the case of sugar factories it
ranges between 9 1/2 to 11 1/2 per cent, so that utilisation of sugarcane in
the case of mills is double that of the power crushers. In these circumstances,
khandsari units and mills belong to two different classes which cannot be said
to be similarly situated so as to attract Art. 14 (vide pp. 69-70 of W.P
.5565-5567 of 1980 Bhagwati Sugar Industry's case).
(4) The khandsari produced by the crushers
has got a very narrow sphere of consumption as it is used mostly by halwais or
villagers, whereas sugar produced by the sugar mills is consumed in far larger
quantities by the public in India generally and in foreign countries after
export. Therefore, the sugar mills fall within a special class and the question
of hostile discrimination does not arise. Similarly, the action taken in order
to protect national interests and distribution of sugar to the entire country
on a rational basis cannot be said to be an unreasonable restriction.
(5) There is a marked difference between the
quality of khandsari and that of sugar produced by the mills in their
character, specification, etc., which is evident from the various reports filed
by the State.
(6) The question of natural justice does not
arise because the crusher owners were fully aware of the situation and had also
knowledge of the considerations which prevailed with the Government in stopping
crushers for a short period in order to boost production by the sugar mills and
fix support price for the sugarcane supplied to the mills. However, as the
Notification has expired, if proper guidelines are laid down by the Court,
before passing a fresh order the State will certainly hear the petitioners in
order to know their point of view.
104 (7) Clause 8 of the Control Order uses
the words `period' or working hours' which are wide enough to embrace within
their ambit a fixed period of time covering more than a day as also hours of
work on any working day.
We might also mention that some of the
sugarcane growers have supported the arguments advanced by the petitioners. We
now proceed to scrutinise and examine the contentions of the counsel for the
petitioners.
On the contention according to which the
impugned notification is violative of Art. 19(1)(g), it may be necessary to
dwell in some detail. It is no doubt well settled that where a citizen
complains of the violation of fundamental rights contained in sub-clause (g) of
clause (1) of Art 19 or for that matter in any of sub clauses (a) to (g)
thereof, the onus is on the State to prove or justify that the restraint or
restrictions imposed on the fundamental rights under clauses 2 to 6 of the
Article are reasonable. In the instant case, we are mainly concerned with
sub-clauses 4, 5 and 6 of Art.19. As far back as 1955 this Court in Saghir
Ahmad v. The State of U.P, and Ors.(1) made this position very clear and
observed as follows :- "There is undoubtedly a presumption in favour of
the constitutionality of a legislation. But when the enactment on the face of
it is found to violate a fundamental right guaranteed under article 19(1) (g)
of the Constitution, it must be held to be invalid unless those who support the
legislation can bring it within the purview of the exception laid down in
clause (5) of the article. If the respondents do not place any materials before
the Court to establish that the legislation comes within the permissible limits
of clause (6), it is surely not for the appellants to prove negatively that the
legislation was not reasonable and was not conducive to the welfare of the
community." A similar view was taken in Mohammed Faruk v. State of Madhya
Pradesh and Ors.(2) where this Court, speaking through Shah, J. reiterated the
position mentioned above in the following words:
"When the validity of a law placing
restriction upon the exercise of fundamental rights in Article 19(1) is
challenged, the onus of proving to the satisfaction of the Court that the
restriction is reasonable lies upon the State." 105 We, therefore fully
agree with the contention advanced by the petitioners that where there is a
clear violation of Art. 19(1)(g), the State has to justify by acceptable
evidence, inevitable consequences or sufficient materials that the restriction,
whether partial or complete, is in public interest and contains the quality of
reasonableness.
This proposition has not been disputed by the
counsel for the respondents, who have, however, submitted that from the
circumstances and materials produced by them the onus of proving that the
restrictions are in public interest and are reasonable has been amply
discharged by them.
This brings us to the main question as to the
circumstances under which restriction imposed by the State can be said to
contain the quality of reasonableness. For this purpose, almost all the
decisions of this Court on the subject have been placed before us and it may be
necessary to notice those of them which have a close bearing on the point at
issue.
It is abundantly clear that fundamental
rights enshrined in Part III of the Constitution are neither absolute nor
unlimited but are subject to reasonable restrictions which may be imposed by
the State in public interest under clauses 2 to 6 of Art.19. As to what are
reasonable restrictions would naturally depend on the nature and circumstances
of the case, the character of the statute, the object which it seeks to serve,
the existing circumstances, the extent of the evil sought to be remedied as
also the nature of restraint or restriction placed on the rights of the
citizen. It is difficult to lay down any hard or fast rule of universal
application but this Court has consistently held that in imposing such
restrictions the State must adopt an objective standard amounting to a social
control by restricting the rights of the citizens where the necessities of the
situation demand. It is manifest that in adopting the social control one of the
primary considerations which should weigh with the Court is that as the
directive principles contained in the Constitution aim at the establishment of
an egalitarian society so as to bring about a welfare state within the
frame-work of the Constitution, these principles also should be kept in mind in
judging the question as to whether or not the restrictions are reasonable. If
the restrictions imposed appear to be consistent with the directive principles
of State policy they would have to be upheld as the same would be in public
interest and manifestly reasonable.
Further, restrictions may by partial,
complete, permanent or temporary but they must bear a close nexus with the
object in the 106 interest of which they are imposed. Sometimes even a complete
prohibition of the fundamental right to trade may be upheld if the commodity in
which the trade is carried on is essential to the life of the community and the
said restriction has been imposed for a limited period in order to achieve the
desired goal.
Another important consideration is that the
restrictions must be in public interest and are imposed by striking a just
balance between the deprivation of right and the danger or evil sought to be
avoided. Thus freezing of stocks of food-grains in order to secure equitable distribution
and availability on fair prices have been held to be a reasonable restriction
in the cases of Narendra Kumar and Ors. v. The Union of India and Ors.(1) M/s.
Diwan Sugar and General Mills (P) Ltd. and Ors v. The Union of India and The
State of Rajasthan v. Nath Mal and Mitha Mal(3).
These are some of the general principles on
the basis of which the quality of reasonableness of a particular restriction
can be judged and have been lucidly adumbrated in State of Madras v. V.G.
Row's(4) case. Another important test that has been laid down by this Court is
that restrictions should not be excessive or arbitrary and the Court must
examine the direct and immediate impact of the restrictions on the rights of
the citizens and determine if the restrictions are in larger public interest
while deciding the question that they contain the quality of reasonableness.
In such cases a doctrinaire approach should
not be made but care should be taken to see that the real purpose which is
sought to be achieved by restricting the rights of the citizens is subserved.
This can be done only by examining the nature of the social control, the
interest of the general public which is subserved by the restrictions, the
existing circumstances which necessitated the imposition of the restrictions,
the degree and urgency of the evil sought to be mitigated by the restrictions
and the period during which the restrictions are to remain in force. At the
same time the possibility of an alternative scheme which might have been but
has not been enforced would not expose the restrictions to challenge on the
ground that they are not reasonable.
107 Finally, in determining the
reasonableness of restrictions imposed by law in the field of industry, trade
or commerce, the mere fact that some of the persons engaged in a particular
trade may incur loss due to the imposition of restrictions will not render them
unreasonable because it is manifest that trade and industry pass through
periods of prosperity and adversity on account of economic, social or political
factors. In a free economy controls have be introduced to ensure availability
of consumer goods like food-stuffs, cloth or the like at a fair price and the
fixation of such a price cannot be said to be an unreasonable restriction in
the circumstances.
Thus, apart from the various other factors
which we have referred to above where restrictions are imposed on a citizen
carrying on a trade or commerce in an essential commodity, the aspect of
controlled economy and fair and equitable distribution to the consumer at a
reasonable price leaving an appreciable margin of profit to the producer is
undoubtedly a consideration which does not make the restriction unreasonable.
In fact, the leading case decided by this
Court which may justly be regarded as the locus classicus on the questions as
to what are reasonable restrictions is V.G. Row's case (supra) where Patanjali
Sastri, C.J., speaking for the Court observed as follows:
"It is important in this context to bear
in mind that the test of reasonableness, where ever prescribed, should be
applied to each individual statute impugned, and no abstract standard, or
general pattern, of reasonableness can be laid down as applicable to all cases.
The nature of the right alleged to have been infringed, the underlying purpose
of the restrictions imposed, the extent and urgency of the evil sought to be
remedied thereby the disproportion of the imposition the prevailing conditions
at the time, should all enter into the judicial verdict. In evaluating such
elusive factors and forming their own conception of what is reasonable, in all
the circumstances of a given case, it is inevitable that the social philosophy
and the scale of values of the judges participating in the decision should play
an important part, and the limit to their interference with legislative
judgment in such cases can only be dictated by their sense of responsibility
and self-restraint and the sobering reflection that the Constitution is meant
not only for people of their way of thinking but for all, and that the majority
of the elected representatives of the people have, in 108 authorising the
imposition of the restrictions, considered them to be reasonable." This
case was followed in a later decision of this Court in Mineral Development Ltd.
v. The State of Bihar and Anr.(1) where after quoting the observations of
Patanjali Sastri, C.J., as extracted above, Subba Rao, J., speaking for the
Court observed as follows:- "These observations, if we may say so with
great respect, lay down the correct principle. It follows that it is the duty
of this Court to decide, having regard to the aforesaid considerations and such
others whether a particular statute satisfies the objective test of
`reasonableness'." In the case of Collector of Customs, Madras v. Nathella
Sampathu Chetty and Anr.(2) the observations of Patanjali Sastri, C.J., were
endorsed by this Court when Ayyangar, J., speaking for the Court, made the
following observations:
"There are several decisions of this
Court in which the relevant criteria have been laid down but we consider it
sufficient to refer to a passage in the judgment of Patanjali Sastri, C.J., in
State of Madras v. V.G. Row." In M/s. Diwan Sugar and General Mills
(Private) Ltd.
and Ors. v. U.O.I.(3) which was also a case
arising out of the Act of 1955 and the Sugar Control Order of 1955 promulgated
by the Central Government under s. 3 of the said Act, a Constitution Bench of
this Court while examining the nature of the restrictions imposed in that case
took into account the various circumstances and observed :
"Clause 5 of the Order lays down the
factors which have to be taken into consideration in fixing prices.
These factors include among other things a
reasonable margin of profit for the producer and/or trade and any incidential
charges. This was kept in mind when prices were fixed by the impugned
notification... The prices were prevalent in the free market and must certainly
have taken account of a fair margin of profit for the producer, though in the
case of an individual factory due to factors for which the producer might 109
himself be responsible, the cost of production might have been a little more.
Therefore, the prices fixed by the Government by the impugned notification can
on no circumstances be said to have been proved to be below the cost of
production." ... ... ...
"In these circumstances if price is
fixed in this area, price all over India is practically fixed, and it is not
necessary to fix prices separately so far as factories in other States which
are said to be mainly deficit, are concerned... There is, therefore, in our
opinion, no discrimination in effect by the fixation of prices in these three
regions." It will be noticed that even though clause 5 had fixed prices,
the Court upheld the restrictions because a reasonable margin of profit for the
producer was left and did not insist that the producer should be allowed to
have full sway in the production of sugar to the maximum capacity possible.
Similarly one of the important tests laid down by this Court was that the price
prevailing in the free market must be taken into account in the formula of
fixation of price for essential commodities secondly while dealing with the
price control imposed on factories in various States, this Court held that the
policy of fixation of price could not be challenged because States where they
were fixed were deficit areas. We might mention here that the sheet anchor of
the argument of the Attorney-General is that the impugned Notification was
passed in order to relieve the sugar famine by boosting the production of sugar
by mills. Similarly, in Nath Mal and Mitha Mal's case (supra), which was also a
case dealing with food-grains, an order freezing the stocks of the commodity in
order to secure its equitable distribution so as to make it available at a fair
price to consumers was upheld by the Court with the following observations:
"The clause authorises the Commissioner
and various others authorities mentioned therein and such other officers as may
be authorised by the Commissioner to frreeze any stock of foodgrains held by a
person...
Nor do we think that the power to freeze the
stocks of foodgrains is arbitrary or based on no reasonable basis.
... ... ...
We are clear, therefore, that the freezing of
stocks of food-grains is reasonably related to the object which the Act was in-
110 tended to achieve, namely, to secure the equitable distribution and
availability at fair prices and to regulate transport, distribution, disposal
and acquisition of an essential commodity such as foodgrains." The most
material ratio of this case is that even the freezing of stocks of foodgrains,
with a view to securing their equitable distribution and availability was held
to be a reasonable restriction. Even if by seizing the food stocks the right of
a citizen to trade in food grains was seriously impaired and hampered yet such
a State action was justified on the ground of public interest.
On a parity of reasoning, therefore, a
restriction (on the right of a trader dealing in essential commodities) like
the ban in the instant case or fixation of prices aimed at bringing about
distribution of essential commodities keeping the consumers interests as the
prime consideration, cannot be regarded as unreasonable.
We are fortified in our view by a decision of
this Court in Prag Ice and Oil Mills and Anr. etc. v. Union of India(1) where
Beg, C.J. observed as follows :- "All the tests of validity of the
impugned price control or fixation order are, therefore, to be found in section
3 of the Act. Section 3 makes necessity or expediency of a control order for
the purpose of maintaining or increasing supplies of an Essential Commodity or
for securing its equitable distribution at fair prices the criteria of
validity. It is evident that an assessment of either the expediency necessity
of a measure, in the light of all the facts and circumstances which have a
bearings on the subjects of price fixation, is essentially a subjectives
matter. It is true that objective criteria may enter into determinations of
particular selling prices of each kilogram of mustard oil at various time. But,
there is no obligation to have to fix the price in such a way as to ensure
reasonable profits to the producer or manufacturer. It has also to be
remembered that the objective is to secure equitable distribution and
availability at fair prices so that it is the interest of the consumer and not
of the producer which is the determining factor in applying any objective tests
at any particular time." The observations extracted above, furnish a complete
answer to the contentions raised by the petitioners on contention No. 1.
111 Furthermore, we would like to reiterate
what Chandrachud, C.J,, observed in that case regarding the history and the
manner in which the petitioners rushed to this Court :- "Before closing,
we would like to mention that the petitioners rushed to this Court too
precipitately on the heels of the Price Control Order. Thereby they deprived
themselves of an opportunity to show that in actual fact, the Order causes them
irreparable prejudice. Instead they were driven through their ill- thought
haste to rely on speculative hypotheses in order to buttress their grievance
that their right to property and the right to do trade were gone or was
substantially affected. A little more patience, which could have been utilised
to observe how the experiment functioned, might have paid better
dividends." This is exactly what the petitioners have done in this case by
rushing to this Court the moment the notification was issued and thus depriving
the State as also themselves of the actual consequences of the issuing of the
notification and the prejudice which it really may have caused. They did not at
all show any patience in waiting for a while to find out if the experiment
functioned successfully and in the long run paid good dividends. As the
petitioners obtained stay orders from this Court on filing these petitions, the
experiment died a natural death and the notification remained ineffective.
It was vehemently contended by Mr. Garg that
the Notification or the Control Order is in direct contravention of the
Directive Principles of State policy contained in Art. 39 in part IV of the
Constitution inasmuch as instead of developing small-scale industries like the
crushers the Notification has curbed the rights of their owners in order to
benefit the mills. It is true that one of the important considerations which
must weigh with the Court in determining the reasonableness of a restriction is
that it should not contravene the Directive Principles contained in Part IV of
the Constitution which undoubtedly has a direct bearing on the question as held
by this Court in the cases of Saghir Ahmad v. State of U.P. and Ors.(1) and The
State of Bombay and Anr. v. F. N. Balsara(2) where this Court made the following
observations :
112 "The new clause in Article 19(6) has
no doubt been introduced with a view to provide that a State can create a
monopoly in its own favour in respect of any trade or business, but the
amendment does not make the establishment of such monopoly a reasonable
restriction within the meaning of the first clause of Article 19(6). The result
of the amendment is that the State would not have to justify such action as
reasonable at all in a Court of law and no objection could be taken to it on
the ground that it is an infringement of the right guaranteed under Article
19(1) (g) of the Constitution" (Saghir Ahmed's case) "In judging the
reasonableness of the restrictions imposed by the Act, one has to bear in mind
the directive principles of State policy set forth in Article 47 of the
Constitution." (Balsara's case) In the instant case, however, if the
argument of the Attorney General is to be accepted, there is no violation of
the Directive Principles because the main object sought to be achieved by a
temporary suspension of the business of the petitioners is to ensure
large-scale production of white sugar and to make it available to the consumers
at reasonable rates which is an implementation rather than a contravention of
the Directive Principles particularly clauses (b) and (c) of Art. 39. Whether
the State has been able to prove this fact or not would be considered when we
deal with the facts and materials placed before us by the parties.
Another important aspect to which we may
advert at this stage is the test which should be laid down to determine the
reasonableness of a restriction involving a citizen carrying on trade or
business in an essential commodity. We have already seen that this Court has
held that fixation of price of sugar or freezing of stock of foodgrains does
not amount to an unreasonable restriction on the fundamental right to trade
enshrined under Art. 19(1)(g). There are other cases in which this Court has
clearly held that in the case of essential commodities like sugar the question
of the economic production and distribution thereof must enter the verdict of
the Courts in deciding the reasonableness of the restrictions. In such cases
even if the margin of profit left to the producer is slashed that would not
make the restriction unreasonable. The reason for this view is that such a
trade or commerce is subject to rise and fall in prices and other diverse
factors which may destroy or prohibit one industry or the other so as to affect
the general body of the consumers and if any measure is taken to strike a just
113 balance between the danger sought to be averted and the temporary
deprivation of the right of a citizen to carry on his trade, it will have to be
upheld as a reasonable restriction. In Shree Meenakshi Mills v. U.O.I. (1) Ray
C.J., speaking for the Court observed as follows:
"If fair price is to be fixed leaving a
reasonable margin of profit, there is never any question of infringement of
fundamental right to carry on business by imposing reasonable restrictions. The
question of fair price to the consumer with reference to the dominant object
and purpose of the legislation claiming equitable distribution and availability
at fair price is completely lost sight of if profit and the producer's return
are kept in the fore-front......
In determining the reasonableness of a
restriction imposed by law in the field of industry, trade or commerce, it has
to be remembered that the mere fact that some of those who are engaged in these
are alleging loss after the imposition of law will not render the law
unreasonable. By its very nature, industry or trade or commerce goes through
periods of prosperity and adversity on account of economic and sometimes social
and political factors. In a largely free economy when control have to be
introduced to ensure availability of consumer goods like foodstuff, cloth and
the like at a fair price it is an impracticable proposition to require the
Government to go through the exercise like that of a Commission to fix the
prices." According to the Attorney General by virtue of the impugned
Notification this is exactly what the Central Government wants to achieve by
banning the working of power crushers for a short period. This case was
followed in another decision of this Court in Saraswati Industrial Syndicate
Ltd. v. U.O.I.(2) which was also a case of a notification issued under clause 7
of the Control Order of 1966, where the following observations were made:
"It is a well-known fact that
rationalisation of industry by the use of modern methods, reduces the amount of
labour needed in more mechanised modes of manufacture. Therefore, we do not
think that these assertions could prove any inequitable treatment meted out to
the Haryana manufacturers of sugar. In any case no breach of a mandatory duty, which
could justify the issue of writ of mandamus, was established.' 114 In the light
of the principles enunciated and the decisions discused above, we now proceed
to examine the facts and circumstances placed before us by the Union of India
to prove that the restrictions imposed under the impugned Notification contain
the quality of reasonableness and are not violative of Art. 19(1)(g). The main
pleas of the State of U.P. which have been adopted by the Union of India are to
be found in paragraphs 6 to 11 of the counter affidavit filed by the
respondents in writ petition Nos. 5565-5567 of 1980. The respondents have taken
the stand that there has been a very steep rise in the prices of sugar which is
doubtless an essential commodity. It has further been alleged that one of the
major factors responsible for the present rise in the prices of sugar is that
there is a sharp rise in the demand for consumption of sugar whereas its
production has slumped to a very low level. In order to illustrate the point it
has been averred that the demand of sugar in the country has increased to over
60 lakh tonnes whereas production of the commodity in the preceding year
(1979-80) was only about 39.5 lakh tonnes. In order to meet the demand the
Central Government had to import for the first time after several years 2 lakh
tonnes of sugar at a cost of about one hundred crores of rupees. One reason for
the shortfall in production during 1979-80 was the poor availability of cane to
the sugar factories. This in turn resulted from the worst drought conditions
faced by our country particularly the State of U.P. which is one of the main
suppliers of sugarcane. Yet another cause of the shortage was that the sugar
famine led to the large scale diversion of cane to gur and khandsari manufacturers.
The counter-affidavit then proceeds to give a chart of the production of sugar
by the crushers and the mills.
It was further averred that unless the
position was set right the stocks of 1979-80 would have been exhausted
completely by the middle of November 1980. To meet this national crisis, the
Government of India took various steps to increase the production of sugar in
the country during the current season (1980-81). In the first place, the
Government of India allowed rebate in the basic excise duty on excess sugar
production in order to serve as an incentive to the sugar mills to start early
cane crushing operation.
This step however, could not possibly have
the desired effect unless the sugar factories got the raw material, viz.,
constant supply of sugarcane. Indisputably sugarcane is utilised for
manufacture of sugar, gur, rab and khandsari and some of the quantity is also
utilised for seed, feed and chewing. It was further alleged that the crushers
particularly those producing gur were in an advantageous position so as to be
able to purchase cane at a very high rate and outcompete the sugar 115
factories. It was possible for the crushers to pay a higher price because no
excise duty or compulsory levy was imposed on them, on the other hand, the
factories suffered from certain disabilities, namely, sixty five per cent of
the sugar production was taken by the Government of India on levy process and
excise duty on free sale sugar was very high as compared to khandsari sugar.
Further, the Government required distribution of molasses at a fixed price of
Rs.6/- per quintal to the mills whereas there was no such obligation on the
power crushers. Finally, because of the monthly release system the factories
could sell only released quantity during a particular month whereas there was
no such restriction on khandsari units owned by the petitioners. These steps
taken by the then Government resulted in an unhealthy competition causing
diversion of cane from the sugar factories with the result that sugar factories
could get only 61.5% of the bonded cane. It was further pointed out in the
counter-affidavit that keeping in view the fact that the sugar stocks of
1979-80 were likely to be exhausted by the middle of November 1980, it was
considered necessary to maintain an adequate supply of sugarcane to the sugar
factories which would have started production earlier because of the incentives
given to them by the Government of India.
In an additional affidavit filed by the
respondents, sworn by Karan Singh, Joint Cane Commissioner, Government of U.P,
it was pointed out that khandsari sugar could never be a substitute for sugar
produced by sugar mills because khandsari sugar is not used for domestic
purpose in preference to mill sugar as the former has higher molasses content
and has unpleasant smell and taste. Further, there is no gradation of khandsari
sugar as its grain is not regular and bold. It was further alleged that in
public distribution it is only the mill sugar which is supplied at fair price
to the consumers at large and which also forms the bulk of the export. The
khandsari sugar, according to the respondents, was generally consumed for
preparation of sweets, boora and batasha and was consumed mostly by the
halwais. There is no reliable evidence to rebut the aforesaid facts detailed in
the counter-affidavit of the respondents.
Thus, in view of the factors detailed above,
it was contended by the Union of India that it was in public interest that with
a view to remove shortage of sugar and achieve equal distribution of sugarcane
to the mills the impugned notification was passed which seems to strike a just
balance between the requirements of the country and those of the khandsari
units. The Attorney General contended that since the ban was imposed only for a
very short period of about 116 one month and a half, there could be no
appreciable loss to the khandsari units, and even if there was some loss it
could be recouped after the ban was lifted because the working cost of the
khandsari units was much less than that of the mills. In other words, by virtue
of the policy adopted by the Government in passing the impugned notification, a
fair margin of profit was left to the khandsari units which were not completely
closed. It was further stated that out of 89 sugar mills in the entire State of
U.P., 18 sugar mills are owned by the U.P. State Sugar Corporation which is a
Government company and controlled by the State. Sixteen sugar mills are under
the cooperative sector in which the Government Investment is considerable and
these mill are run by cooperative societies of which cane growers are
shareholders. Thus, the ultimate benefit did undoubtedly go to the sugarcane
growers also through the profits made by the cooperative societies. The learned
counsel, Mr. Garg, appearing for the petitioners countered the inferences drawn
by the respondents with the submission that although the above facts may not be
disputed yet it was not correct to say that the khandsari units had put the
mills completely out of competition. It was suggested that the khandsari units
were also, apart from paying a higher price to the sugarcane growers, prepared
to be subjected to compulsory levies or excise duty levied on the mills or to
such terms as the Government may like to put on the owners of the crushers. The
argument is, no doubt, attractive but we are not sure if and when these harsher
terms are imposed on the petitioners, it would be possible for them to run the
crushers and make the huge profits which they are making without the aforesaid
impositions. At any rate, since the impugned notification has expired, the
Government will certainly consider the desirability of a reappraisal of the
situation after taking into account this aspect of the matter. It was further
pointed out by the Union of India that only 39 sugar mills are in the private
sector and ensuring actual availability of sugar at reasonable rates to the
sugar mills was the prime consideration which formed the basis of impugned
notification in conformity with the object of the Act of 1955 and the Control
Order so as to maintain a fair price for the general public. Learning a lesson
from the performance of the sugar market in the preceding year, the Government
thought it more desirable to channelise the production of sugarcane so that the
interests of neither the sugar mill owners nor of the khandsari units nor those
of the cane-growers suffered.
It was then contended that the impugned
notification far from causing any appreciable damage or loss to the petitioners
serve a 117 two-fold purpose which ensures equitable production and
distribution of sugar.
Another important argument advanced by the
Attorney- General which has impressed us most is one resulting from the use by
the mills of the hydraulic process as distinguished from the open pan process
employed by khandsari units for the production of sugar. The consequence is the
recovery of sugar from sugarcane in the case of khandsari units run by power
crushers is between 4 to 6 per cent whereas in the case of sugar factories it ranges
between 9 1/2 to 11 1/2 per cent. Thus, the overall position is that the
utilisation of sugarcane by the mills is double that by the crushers and if the
crushers are not able to produce more than the existing 4 to 6 per cent, half
of the total quantity of sugarcane supplied to them goes waste which, if
utilised by the factories, would have served for production of more sugar.
This solid distinction between the two
processes of manufacture followed by the mills and the crushers is, in our
opinion, a very rational distinction which puts the mills in a different class
and which also provides a reasonable nexus between the restrictions imposed on
the crushers and the object sought to be achieved. The petitioner sought to
falsify the figures quoted by the Union of India regarding the percentage of
recovery of sugar by reference to a book written by Mr. Bepin Behari, and
entitled `Rural Industrialization in India'. On page 100 of the book, the
author has observed as follows :
"Originally, the percentage of recovery
in traditional khandsari units did not go beyond 6.5 per cent, but recent
innovations have raised the recovery ratio to almost 9.5 per cent. Thereby the
two processes have become almost commutative. In inversion loss, however, there
is some difference. In the large-scale sugar mills, only ten per cent of the
sugar is lost while in small khandsari plants the loss can be as much as 30 per
cent." and great reliance has been placed on these observations of the
author. It may be noted, however, that the author has not cited any expert
opinion as the foundation for his conclusion nor has he referred to any
experiment carried out by him personally. In fact he has not even disclosed the
source of his information. Apart from that the book fully supports the averments
of the respondents that the percentage of recovery in traditional khandsari
units did not go beyond 6.5 per cent. Besides, there is no evidence or
allegation in any of the affidavits filed by the petitioners to the effect that
any new methodo- 118 logy or innovation was adopted by any of the petitioners.
In these circumstances, the extract from the book does not appear to be of any
assistance to the petitioners.
On the other hand, the facts detailed by the
respondents in the various counter-affidavits filed by them are based on the
statistics maintained by the Government from year to year and reports of
experts. One such report entitled `studies on Specific Conductances of Indian
Sugar' has been filed by the State before us and it gives the entire history
and economics of sugar production.
After a careful consideration of the
arguments and documents produced by both the parties we are satisfied that the
restriction imposed by the impugned notification in stopping the crushers for
the period 10th October to 1st December 1980 is in public interest and bears a
reasonable nexus to the object which is sought to be achieved, namely, to
reduce shortage of sugar and ensure a more equitable distribution of this
commodity.
One of the tests that has been laid down to
determine the reasonableness of a restriction is to find out if the restraint
is more excessive than that warranted by the situation. In the instant case,
taken an overall picture of the history of sugar production it cannot be said
that the stoppage of sugar crushers for a short period is more excessive than
the situation demanded.
In Madhya Bharat Cotton Association Ltd. v.
Union of India & Anr.(1) while considering a restriction imposed for a
short time, this Court observed as follows :- "Further, cotton being a
commodity essential to the life of the community, it is reasonable to have
restriction which may, in certain circumstances, extend to total prohibition
for a time, of all normal trading in the commodity. Accordingly, we are of
opinion that Clause 4 of the Cotton Control Order of 1950 does not offend Art.
19 (1) (g) of the Constitution because sub- clause (5) validates it."
(Emphasis supplied) In that case the restriction imposed on cotton was for a
short period of one month in February 1954 and for another month in May 1954;
and was held to be justified and a reasonable restraint so 119 as not to be
violative of Art 19 (1) (g). The situation here is similar. Afterall, the
petitioners were working their crushers under a licence granted to them under
the Licensing Order and the impugned notification merely seeks to regulate the
right and not to abolish the same.
For the above reasons the first contention
put forward by the petitioners that the restrictions imposed by the impugned
notification are unreasonable is hereby overruled and it is held that such
restrictions clearly contain the quality of reasonableness and when tested on
the touchstone of the principles laid down by the various authorities referred
to above, they fully satisfy all the requirements of a reasonable restriction.
This takes us to contention No. 2 raised by
the petitioners. It was submitted before us that clause 8 of the Control Order
under which the impugned notification has been issued suffers from the vice of
excessive delegation of powers and is, therefore, violative of Art. 14 of the
Constitution. It was argued that as the notification seeks to establish a
monopoly in favour of the sugar mills at the cost of the petitioners it seeks
to make per se an invidious discrimination which is writ large on the very face
of the notification which is, therefore violative of Art. 14.
As regards first limb of the argument it may
be necessary to state that the Control Order itself has been passed under the
authority of s.3 of the Act of 1955 which has been held by this Court to be
constitutionally valid and is not in any way discriminatory so as to attract
Art. 14.
The Control Order itself having been passed
under s.3 contains sufficient guidelines, checks and balances to prevent any
misuse or abuse of the power conferred on the authorities concerned under
clause 8. Clause 8 runs thus:- "8. Power to issue directions to producers
of khandsari, sugar, power-crushers, khandsari units, crushers and cooperative
societies.-The Central Government may, from time to time, by general or special
order, issue directions to any producer of khandsari sugar or owner of a
power-crusher, khandsari unit or crusher or the agent of such producer or owner
or a cooperative society regarding the purchase of sugar or sugarcane juice,
production, maintenance of stocks, storage, price, packing, payment disposal,
delivery and distribution of sugar-cane, gur gul, jaggery and rab or khandsari
sugar or the period or hours to be worked." 120 To begin with it may be
noticed that the power to issue orders or directions from time to time is
conferred on the Central Government which is undoubtedly a very high authority
and must be presumed to act in a just and reasonable manner. This point is well
settled and concluded by several decisions of this Court as detailed below. In
Chinta Lingam & Ors. v. Government of India Ors., (1) this Court made the
following observations:
"At any rate, it has been pointed out in
more than one decision of this Court that when the power has to exercised by
one of the of the highest officers the fact that no appeal has been provided
for is a matter of no moment.....It was said that though the power was
discretionary but it was not necessarily discriminatory and abuse of power
could not be easily assumed. There was moreover a presumption that public
officials would discharge their duties honestly and in accordance with rules of
law." This case was followed in V. C. Shukla v. State (Delhi Admn.)(2)
where one of us (Fazal Ali, J.) speaking for the Court observed as follows :
"Furthermore, as the power is vested in
a very high authority, it cannot be assumed that it is likely to be abused. On
the other hand, where the power is conferred on such a high authority as the
Central Government, the presumption will be that the power will be exercised in
a bona fide manner and according to law." Moreover, the power cannot be
said to be arbitrary or unguided because the impugned notification derives its
source from s. 3 of the Act of 1955 which clearly lays down sufficient
guidelines and the existence of certain conditions for proper distribution of
an essential commodity. The said guidelines therefore, govern the authority
passing the impugned notification.
Secondly, clause 8 merely seeks to regulate
and guide the conditions and the circumstances under which the manufacturers
may exercise their rights. In other words, any order passed under clause 8 is
prima facie purely of a regulatory nature. It was, however, submitted that the
Notification has been passed by the Cane Commissioner, Government of U.P. and
it does not contain any materials 121 or reasons why the ban was imposed on the
crushers owned by the petitioners. As the Notification itself has been passed
under clause 8 of the Control Order read with Government of India G.S.R. No.
1122 dated July 16, 1966 and under the Essential Commodities Act it was not
necessary for the Cane Commissioner to have stated or detailed the reasons why the
Notification was issued. In fact, the Notification and the Control Order have
to be read in the light of the main Act, viz., the Act of 1955, which itself
provides the necessary guide lines, namely, that it is essential in public
interest and to secure proper distribution of an essential commodity to pass
orders by various authorities from time to time.
This is the scheme of s. 3 of the Act of 1955
which has not been challenged before us by the petitioners.
It was further argued in the same token that
the impugned notification seeks to establish a monopoly in favour of the sugar
mills at the cost of the petitioners who have been selected for hostile
discrimination as against the mills. While detailing and narrating the facts
and the history of sugar production we have already shown that the State has
placed cogent materials before us to show why the sugar mills had to be given a
special treatment by temporarily stopping the production of sugar by the
crushers. We have already dealt with the various factors while examining
contention No. 1 of the petitioners and it is not necessary for us to repeat
the same here. There was no question of creating any monopoly to benefit the
mills particularly when a very large majority of the mills were controlled by
the State or cooperative societies and only a small fraction of them were
working in the private sector.
In view of the low working cost of the
crushers they sought to outcompete the mills and deprive them of the requisite
amount of sugarcane which they should have got. It was not only just but also
essential to boost the production of the factories so that white sugar may be
produced on a large scale and sugarcane may not be wasted which would have been
the case if most of the sugar-cane went to the crushers. We have pointed out
that the recovery of sugarcane juice by the mills is double that by crushers,
and if the latter were allowed to operate the wastage of the sugarcane would
have been almost 50 per cent which could have been avoided if sugar cane was allowed
to be utilised by the mills.
The third limb of the argument on this point
was that there was no rational nexus between the prohibition contained in the
Notification preventing the petitioners from working their crushers, even
though for a short period, and the object sought to be achieved by it. This
contention also must necessarily fail as we have already shown that such nexus
existed.
122 It was argued by Mr. Garg that as India
lives in villages it was not understandable why the Central Government was bent
on reducing the support price of sugarcane and thus causing loss to the
sugarcane growers. It was true that the mills were not in a position to pay as
high a price for sugarcane as the crushers but that was for so many reasons
which we have discussed above, namely, the various liabilities which were
imposed on the mills, e.g., the excise duties, the levy, etc. Once a certain
amount of stability was achieved in the sugarcane industry, the ultimate
benefit would undoubtedly go to the sugarcane grower even though he may have to
be paid a lesser support for supply of sugarcane to the mills. It was,
therefore, in public interest that a lesser support price for sugarcane had
been fixed. Moreover, it was for the Central Government who was in the know of
the circumstances prevailing in the State or for that matter in the country to
determine the support price of sugarcane. Even though the crushers may have
paid a higher price, in the long run, the sufferers would be the sugarcane
growers as also the consumers who would be deprived of the sugar produced by
the mills which was undoubtedly superior to the khandsari sugar and has a
vaster area of consumption in the country and is also meant for purposes of
export.
The report entitled 'Studies on Specific Conductance’s
of Indian Sugar' referred to above, details the distinctive features of the
white sugar produced by the mills and the khandsari sugar where the various
features of the nature and character of sugar are pointed out thus.
"This plantation sugar is crystalline,
white lustrous and has a purity of 99.8 per cent. The size of the crystal of
this sugar varies from 0.3 to 2.5mm.
This sugar is graded according to the Indian
sugar standards: Sugar corresponding to 30A is very white sugar with grain size
of about 2.5mm. While 27 E refers to less white sugar with grain size of about
0.4 mm.
The numeral 30, 29 and 27 indicate the
decreasing order of the whiteness of the sugars and the letters A E to the
grade of the grain size Apart from these sugars produced in well established
commercial factories, the similar type of which are known in other countries,
another kind of sugar produced perhaps only in India and nowhere else, is the
khandsari sugar which is being manufactured in small scale industrial units While,
in the sulphitation factories the classified sugar syrups are boiled under
vacuum, in Khandsari units the same is carried out in the open pans. This sugar
used to be palish yellow in colour 123 Nagaranjars and his co-workers studied
the conductivity of plantation white sugars and refined sugars and found
distinctive difference in conductivity of plantation white sugar and refined
sugar." It has been clearly averred in para 15 of the counter affidavit
filed by Mr. Bhola Nath Tiwari, Cane Commissioner, Government of U.P. (who
issued the impugned notification) that in year 1978-79 the production in the
reserved areas was 578.78 lakh tonnes out of which the percentage of cane
utilised by the sugar mills was 27.24 whereas it was 9.73% in the case of the
khandsari manufactured by power crushers.
It is also stated that out of the total
quantity of sugarcane only 45.23 per cent was utilised by gur manufacturers and
the remaining 17.5 per cent was used for seed, feed and chewing purposes etc.
Similarly, in the year 1979-80 there was a steep fall in the production of
sugarcane from 578.78 lakh tonnes in the previous year to 471.11 lakh tonnes.
Owing to this loss of production, there was keen competition for purchase of
sugarcane between the sugar mill owners and the khandsari units. As a result of
this unhealthy competition sugar mills had to close down prematurely resulting
in the loss of production of sugar.
A very attractive argument was submitted
before us by Mr. Gupta, appearing for some of the owners of power crushers. It
was submitted that so far as the petitioners represented by him were concerned,
they were growing sugarcane in their own fields and had installed power
crushers in their own land though the said land fell within the reserved area.
It was argued that these petitioners fell in a separate category and the
Government could not compel them to supply sugarcane to the mills instead of
using the sugarcane grown by them in their own crushers. An apparent snag in
this argument is that if in the larger public interest it becomes necessary to
compel the sugarcane growers to supply sugarcane to the mills at a particular
rate in order to meet a national crisis, no person can be heard to say that his
rights are taken away in an unjust or discriminatory fashion...Personal or
individual interests must yield to the larger interests of the community. This
is exactly the philosophy behind the passing of the Act of 1955.
Merely because the petitioners are growing
sugarcane in their own fields and own power crushers, therefore, they cannot be
treated as a class separate from the others owners of power crushers situated
within the reserved area of the mills.
124 Secondly, it was argued by Mr. Gupta and,
in our opinion, rightly that the impugned notification is ex-facie
discriminatory inasmuch as it differentiates between vertical and horizontal
power crushers without any rhyme or reason. He submitted that no rational basis
has been suggested by the State for making the distinction when both types of
crushers produce almost the same quantity of khandsari and apply the same
mechanical process (open pan process). What difference does it make, says Mr.
Gupta, if a power crusher is vertical or horizontal? In the case of a
horizontal power crusher rollers are in a horizontal line situated on the
surface whereas in the vertical power crusher the rollers instead of being on
the surface are in a vertical position without there being any difference in
the working of the two crushers. We are of the opinion that this argument of
Mr. Gupta is sound and must prevail. The Additional Advocate-General, U.P.
sought to draw several distinctions between a vertical power crusher and a
horizontal one, namely, (1) a vertical power crusher can crush 1500 quintals of
sugarcane per month whereas a horizontal one crushes 5600 quintals of the
commodity in the same period; (2) vertical power crushers are non commercial
and fall within the category of cottage industry whereas horizontal power
crushers are included in the category of small-scale industry; (3) vertical
power crushers are run by their owners themselves and draw supplies from
sugarcane growers and (4) vertical power crusher do not require any licence. So
far as the last part of the argument of the Additional Advocate-General of U.P.
that vertical power crushers do not require a licence is concerned, it is
factually wrong because all such crushers require a licence by virtue of the
Orders passed by the Central Government under s.3 of the Act of 1955. Regarding
the other distinctive features the mere ipse dixit of deponent Gupta who has
sworn an affidavit, there is absolutely no documentary evidence to support the
features pointed out or relied upon by the Additional Advocate General. In
these circumstances, it has not been proved to our satisfaction that there is
any real distinction between a vertical and a horizontal power crusher, and we
regard both as falling in the same class. The notification by exempting
vertical power crushers and prohibiting horizontal power crushers is clearly discriminatory
and the discrimination is not justified by any rational nexus between the
prohibition and the object sought to de achieved.
In these circumstances, therefore, we hold
that in so far as the word 'vertical' used in the impugned Notification is
concerned it must be struck down as being violative of Art. 14. This, however,
125 does not render the entire notification void because the word 'vertical'
used in the notification is clearly severable from the other portions of the
notification. All that has to be done is to read the notification without the
word 'Vertical' as a result of which the exemptions from ban will include all
owners of power crushers (whether vertical or horizontal) which manufacture gur
or rab from sugarcane grown on their fields. Again, as the notification has al-
ready spent its force, if any order is passed in future, the Government will
see to it that such an invidious discrimination is not repeated.
We now come to contention No.4 by which it
was urged that the express language of clause 8 of the Control Order does not
contemplate a complete prohibition of the production of an article but
envisages mere regulation of the period or hours of working. It was argued that
the words 'period or hours' used in clause 8 are relatable only to the number
of actual hours in a day for which the crushers may be permitted to work from
time to time and not a complete stoppage or prohibition of the crushers for a
period of a month or two. Clause 8, as extracted supra, uses the words 'period
or hours to be worked.' A plain reading of this expression clearly reveals that
the words 'period' and 'hours' have been used to connote two different aspects
of the matter. In other words, clause 8 contemplates regulation of working of
the sugar by two separate methods (1) where only hours of work per day are to
be regulated or fixed, for instance, where a crusher normally works for 10
hours, a notification under this clause may provide that it should work only
for 8 hours or 6 hours or 10 hours a day or for a number of days. (2) The word
'period' however, has nothing to do with the hours to be worked but it refers
to another category of regulation viz., whether a crusher is to run or not for
a particular period of time. We are unable to agree with the contention of Mr.
Garg that the two words must be taken to have been used in clause 8 in the same
sense. In fact, this interpretation of the words will cause violence to the
language of the statutory provision and instead of advancing its object it
would frustrate the purpose which clause 8 seeks to subserve. In the instant
case, the notification has resorted to the first category, viz., the period of
the working of the crushers, that is to say, about one and a half month, and
has not at all touched or impinged upon the working hours of the crushers. If,
however, the notification had fixed certain hours of the day during which only
the crushers could work, then the notification would have resorted to the
alternative mode of regulation, which obviously has not been done in this case
We are unable to agree with the contention put forward by Mr. 126 Garg and hold
that the impugned notification is wholly consistent with the provisions
contained in clause 8 of the Control Order.
Contention Nos. 5, 6 and 7 relate to the
objection taken by the petitioners to the validity of the impugned notification
on several grounds. In regard to contention No. 5, the notification has been
attacked on the ground that the Central Order violates the principles of
natural justice inasmuch as it was passed without hearing the petitioners whose
valuable rights were involved and their trade was stopped and they were put
completely out of production even though for a short period of about one and a
half month. It was contended that though clause 8 does not expressly provide
for a hearing yet even if it be considered to be an administrative order, the
rule of audi alteram partem fully applies and the Cane Commissioner should have
passed the impugned notification only after hearing the petitioners.
Reliance was placed for this proposition on a
large number of authorities. It is true that with the growth of law in our
country, this Court has consistently held for the last few years that the rules
of natural justice must apply even to an administrative order unless the same
are expressly excluded. Mr. Garg has also other counsel for the petitioners
submitted that the mere fact that there is no express provision in clause 8 for
hearing the petitioners before imposing any restrictions on their business
provides good reason to hold that the right to be heard was inherent in the
very act of prohibition since the stoppage of the business of the petitioners
would entail civil consequences.
Thus, they argued, as no hearing was given to
the petitioners, the notification was void and inoperative.
Reliance was placed on the observations of
Krishna Iyer, J., in Mohinder Singh Gill & Anr. v. The Chief Election
Commissioner, New Delhi & Ors.(') which may be extracted thus:-
"Indeed, natural justice is a pervasive facet of secular law where a
spiritual touch enlivens legislation administration and adjudication, to make
fairness a creed of life. It has many colours and shades, many forms and shapes
and, save where valid law excludes, it applies when people are affected by acts
of Authority. It is the bone of healthy government, recognised from earliest
times and not a mystic testament of judge-made law The dichotomy between
administrative and quasi- judicial functions vis-a-vis the doctrine of natural
justice is presumably 127 Obsolescent after Kraipak 1970 1 SCR 457 in India and
Schmidt (1969 (2) Ch.. 149) in England.
... ... ...
The procedural pre-condition of fair hearing,
however minimal, even post-decisional, has relevance to administrative and
judicial gentlemanliness. The Election Commission is an institution of central
importance and enjoys far-reaching powers and the greater the power to affect
others' right or liabilities the more necessary the need to hear.
... ... ...
We consider it a valid point to insist on
observance of natural justice in the area of administrative decision-making so
as to avoid the devaluation of this principle by administrators already
alarmingly insensitive to the rationale of audi alteram partem !" Strong
reliance was also placed on the observations of this Court in Maneka Gandhi v.
U. O. I.(') where Bhagwati, J., after full discussion of the entire subject,
observed thus:- "The law must, therefore now be taken to be well settled
that even in an administrative proceeding which involves civil consequences,
the doctrine of natural justice must be held to be applicable." Similarly,
in a very recent case S. L. Kapoor v.
Jagmohan(2) this Court had taken an
opportunity to emphasis the importance of rules of natural justice and reiterated
as follows:
"The old distinction between a judicial
act and an administrative act has withered away and we have been liberated from
the psittacine incantation of "administrative action". Now from the
time of the decision of this Court in State of Orissa v. Dr. (Miss) Binapani
Dei [1967] 2 S.C.R. 625, even an administrative order which involves civil
consequences...must be made consistently with the rules of natural
justice." A number of other decisions were also cited on the question of
natural justice and we agree with the propositions adumbrated by 128 Mr. Garg
that normally where an administrative order adversely affects the valuable
rights of the party affected, a reasonable opportunity of hearing must be given
to the person affected. The instant case, however, contains two prominent
features which exclude the rules of natural justice. Section 3 of the Act of
1955 under which the Control Order was passed really covers an emergent
situation so as to meet a national crisis involving the availability or
distribution of any essential commodity which may make it necessary to restrict
or control the business carried on by a citizen. It has already been pointed
out by us while discussing the case of the respondent that there was an acute
shortage of sugar which was not made available to consumers at reasonable rates
and the situation caused serious dissatisfaction among the people. Nothing
short of immediate and emergent measures taken to solve this crisis would have
eased out the situation. We are fortified in this opinion by a Constitution
Bench decision of this Court in Prag Ice and Oil Mills and Anr. v. U. O. I.(')
where Chandrachud, C. J.. observed as follows:- "The dominant purpose of
these provisions is to ensure the availability of essential commodities to the
consumers at a fair price. And though patent injustice to the producer is not
to be encouraged, a reasonable return on investment or a reasonable rate of
profit is not the sine qua non of the validity of action taken in furtherance
of the powers conferred by section 3 (1) and section 3 (2) (c) of the Essential
Commodities Act.
The interest of the consumer has to be kept
in the forefront and the prime consideration that an essential commodity ought
to be made available to the common man at a fair price must rank in priority
over every other consideration." If hearing was to be given to so many
owners of power crushers, it would have completely defeated and frustrated the
very object not only of the Notification but also of the Act of 1955 and
created complications which may have resulted in a further deterioration of an
already serious situation. If the rules of natural justice were not applied in
such an emergent case, the petitioners cannot be heard to complain. Afterall
the notification directed stoppage of operation of the petitioners' crushers
only for a very short period and they would have had an opportunity of
recouping their loss after they were allowed to function because the proportion
of consumption of khandsari sugar was limited as indicated 129 above. The
petitioners were, therefore, not seriously prejudiced and have rushed to this
Court rather prematurely.
The Attorney General had, however, a much
more effective answer to the contention raised by Mr. Garg on this point. It
was submitted by the Attorney General that having regard to the circumstances,
the background and the situation in which the impugned notification was issued
under clause 8 of the Control Order, it had a statutory complexion and should
be regarded as purely legislative in character. He added that no one had ever
argued that before passing a legislation, the persons affected by the
legislation should he heard, and that therefore, the question of hearing or
complying with the rules of natural justice would not arise. The Attorney
General placed reliance on a decision of this Court in Saraswati Industrial
Syndicate Ltd. etc. (supra) and particularly on the following observations made
by Beg, J.,- "Price fixation is more in the nature of a legislative
measure even though it may be based upon objective criteria found in a report
or other material. It could not, therefore, give rise to a complaint that a
rule of natural justice has not been followed in fixing the price.
Nevertheless, the criterion adopted must be reasonable. Reasonableness, for
purposes of judging whether there was an "excess of power" or an
"arbitrary" exercise of it, is really the demonstration of a
reasonable nexus between the matters which are taken into account in exercising
a power and the purposes of exercise of that power.
(Emphasis ours) Having regard to the facts in
the instant case, a temporary ban on power crushers of a particular type was a
measure governed by same, if not higher, considerations as an order of fixation
of price.
The las tmentioned case is an authority for
the proposition that an order like the impugned notification is a legislative
measure. That being the position, the rules of natural justice stand completely
excluded and no question of hearing arises. Mr. Garg, however, submitted that
in that case the petitioner did not urge that the price fixation required a
quasi-judicial procedure. Even so, the Court clearly decided that a measure
like the one we have in the instant case is purely of a legislative character
and there is no question of complying with the rules of natural justice in such
cases.
130 In Chairman Board of Mining Examination
and Anr. v. Ramjee(') Krishna Iyer, J. speaking for the Court, pointed out that
there may be cases where rules of natural justice can be dispensed with. In
this connection he observed as follows:
"Natural justice is no unruly horse, no
lurking land mine nor a judicial cure-all. If fairness is shown by the
decision-maker to the man proceeded against, the form, features and the
fundamentals of such essential processual propriety being conditioned by the
facts and circumstances of each situation, no breach of natural justice, can be
complained of. Unnatural expansion of natural justice, without reference to the
administrative realities and other factors of a given case, can be
exasperating." (Emphasis supplied) In Joseph Beauharnais v. People of the
State of IIIinois(2) the following observations were made which are apposite to
the facts of the present case :- "This being so, it would be out of bounds
for the judiciary to deny the legislature a choice of policy, provided it is
not unrelated to the problem and not forbidden by some explicit limitation on
the State's power. That the legislative remedy might not in practice mitigate
the evil, or might itself raise new problems, would only manifest once more the
paradox of reform. It is the price to be paid for the trial-and- error inherent
in legislative efforts to deal with obstinate social issues." The passing
of the notification in the instant case was an act of a legislative character
and was really a trial- and-error method adopted to deal with a very serious
social problem.
In Bates v. Lord Halsham of St. Marlebone and
Ors.(3) under similar circumstances a statutory committee had made an order in
relation to powers to licence hackney carriages.
Commenting on this provision Megarry, J.
Observed as follows:- "In the present case, the committee in question has
an entirely different function: it is legislative rather than administrative or
executive. The function of the committee is to make or refuse 131 to make a
legislative instrument under delegated powers. The order, when made, will lay
down the remuneration for solicitors generally; and the terms of the order will
have to be considered and construed and applied in number-less cases in the
future... Many of those affected by delegated legislation, and affected very
substantially are never consulted in the process of enacting that legislation,
and yet they have no remedy." For the reasons aforesaid we find ourselves
in complete agreement with the argument of the Attorney General that the
impugned notification having been passed to effectuate the object or ideal to
be achieved in order to solve a national crisis cannot but be considered a
legislative measure so as to exclude rules of natural justice. The contention
raised by the petitioners on this ground is, therefore, overruled.
In contention No. 6 another infirmity pointed
out by the learned counsel for the petitioners was that the impugned
notification is clearly violative of clause 11 of the Control Order itself
because the prohibition against the working of the power crushers even for a
short period amounted to a partial revocation of the licences granted to the
petitioners under clause 3 of the Licensing Order. In order to appreciate this
contention it is necessary to extract clause 11 (2) of the Control Order which
runs:- "(2) Where all or any of the powers conferred upon the Central
Government by this Order have been delegated in pursuance of sub-clause (I) (b)
to any officer or any authority of a State Government, every Order or direction
issued by such officer or authority in exercise of that power may be amended,
varied or rescinded by the State Government to whom the officer or authority is
subordinate either suo motu, or on an application made within a period of
thirty days from the date of the order or direction.
Provided that no order revoking a licence or
permit issued to a person shall be made without giving such person an
opportunity to make representation." Reliance was particularly placed on
the proviso extracted above. It was contended that even a temporary suspension
of the operation of power crushers amounted to a partial revocation of the
licence granted to the petitioners and that therefore it was incumbent on the
authorities concerned to give the petitioners an opportunity of being 132 heard
and making a representation before such revocation took effect. The Attorney
General rightly pointed out that neither subclause (2) nor the proviso thereto
is attracted in the instant case. It is true that the petitioners got licences
under the Licensing Order which was also passed under the Act of 1955. A
revocation of a licence means that the licence has not been suspended but
cancelled for all times to come entailing civil consequences and complete
abolition of the right for the exercise of which the licence was granted. A
temporary suspension of the working of the crushers owned by the petitioners
cannot amount to a revocation, either complete or partial. In fact, in our
opinion, the proviso to sub-clause (2) of clause 11 of the Control Order does
not at all envisage a partial or periodical revocation of a licence. The proviso
would come into play only if a licence is revoked or cancelled once for all.
Since a revocation or cancellation of the licence would operate to the serious
prejudice of the licensee and affect him adversely, it was considered necessary
and expedient to give him a hearing. We are fully satisfied that the impugned
notification does not attract the conditions laid down in the proviso so as to
confer upon the petitioners a right of hearing. The proviso is, therefore,
wholly inapplicable to the facts of the present case.
It was further submitted by the counsel for
the petitioners that even if clause 11 did not apply because the notification
is of a legislative character a hearing would have removed the apprehensions of
the petitioners. This argument has no substance because once it is held that
the notification is impressed with a legislative character, the question of
hearing does not arise. It may be true that despite the fact that there is no
necessity of hearing, the Government could have evolved some method of giving a
very short notice to the Association and taking its views. But the omission to
do so would not vitiate the notification impugned. It is well settled that
possibility of an alternative scheme which might have been but has not been
designed, would not be sufficient to make a restriction unreasonable. In State
of Maharashtra v. Mumbai Upnagar Gramodyog Sangh(1) this Court observed as
follows:- "The legislature has designed a scheme by which reasonable
restrictions are placed upon the right of a citizen to dispose of his property:
possibility of an alternative scheme which might have been but has not been
designed, will not justifiably expose 133 the first scheme to the attack that
it imposes unreasonable restrictions." Lastly, on contention No. 7 it was
urged that the impugned notification, which purports to have been passed under
the Control Order (which itself was a subordinate legislation passed under s.3
of the Act of 1955) if properly considered along with the serious mis-chief it
causes to the citizens, goes against the very spirit and object of the Act of
1955 and frustrates the equitable distribution and production of sugar which
apparently seems to be the main object sought to be achieved. This argument has
already been considered by us when we dealt with the various facts and
materials produced before us to justify the impugned notification. We have
already pointed out that in view of an extraordinary situation viz., the sugar
famine and the increasing demand of sugar by the consumers, the interests of
the consumers had to rank above all considerations. The notification, as stated
by us earlier strikes a just balance between the needs of the consumers and the
harm which may be done to the owners of the crushers. The degree and urgency of
the evil sought to be remedied by a social control is the purport and the
central theme of the impugned notification.
Having regard to the various aspects which we
have indicated above, it cannot be argued with any show of force that the
remedy sought by the notification is in any way arbitrary or excessive. On the
other hand, the report of the experts, stoppage of the production of sugar by
the factories, the drought conditions and other factors have to enter into the
decision of the Government in passing the impugned notification. The
notification ex facie cannot be said to have been passed without due care and
deliberation. Relevant portion of Section 3 of the Act of 1955 runs thus:-
"3. (1) If the Central Government is of opinion that it is necessary or expedient
so to do for maintaining or increasing supplies of any essential commodity or
for securing their equitable distribution and availability at fair prices. (or
for securing any essential commodity for the defence of India or the efficient
conduct of military operations) it may, by order, provide for regulating or
prohibiting the production, supply and distribution thereof and trade and
commerce therein." The impugned notification having been passed under s.3
of the Act, it fulfils all the conditions contained therein, viz., it is
expedient for maintaining or increasing the supply of an essential commodity
namely, sugar, which is included in clause (e) of s.2 of the Act of 134 1955
and it regulates the supply and distribution of that essential commodity and
the trade and commerce therein.
Having regard, therefore, to the facts and
circumstances proved in this case, it cannot be said that either the Control
Order or the impugned notification is against the tenor and spirit of section
3. On the other hand, it is manifestly clear from the circumstances disclosed
above that it is in pursuance of the aim and object for which s.3 was enshrined
in the Act of 1955 that the Control Order and the notification were
promulgated. The contention of the learned counsel for the petitioners on this
score is accordingly overruled.
Mr. Rameshwar Dayal, appearing for some of
the petitioners raised a novel argument which was to the effect that not only
the notification impugned but also the Control Order was violative of Art. 14
of the Constitution. It was contended that since the State had already fixed
reserved areas for the factories, the selection of khandsari units for banning
or stopping their production amounted to a mini classification without any
rational basis. We are, however, unable to accept this contention because in
view of the various circumstances discussed above, the classification, if at
all, was based on a reasonable nexus with the object sought to be achieved by
the notification. Certain other aspects were also raised by Mr. Dayal which
amount to almost a repetition of the main arguments placed before us by Mr. Garg
and the counsel following him.
Thus, on an overall consideration of the
various aspects of the matter we are fully satisfied that applying the well
established tests of reasonableness, the impugned notification cannot be said
to contain the quality of unreasonableness but is per se fair and reasonable
and fully satisfies the conditions laid down by this Court in determining
whether or not a restriction is reasonable.
Before closing the judgment we would like to
lay down certain guidelines for any future policy that the Government may
consider fit to shape in the light of the discussion on the points raised
before us in this case. In fact, both counsel for the petitioners and the
Attorney General had requested us to lay down certain guidelines so that the
Government may benefit from the same. Although we have upheld the impugned
notification but having regard to the special features of the present case we
are not quite satisfied that a better policy to control sugar or increase its
production could not be followed which may satisfy the parties concerned, viz.,
the crushers, the mills, the sugarcane growers and the consumers.
135 In case the Government decides to impose
a ban in future on the power crushers or other units, it may consider the
desirability of giving a bare minimum hearing not to all the owners of
khandsari units but to only one representative of the Association representing
them all, and getting their views on the subject. It is possible that they
might give some suggestions which the Government would like to incorporate in
formulating its policy. Even if the Government thinks that an emergent
situation has arisen and it may not be possible to give a hearing, atleast a
representation against the proposed action may be called for from such
Association and considered after giving the shortest possible notice. Not that
such action is a legal requirement but it will generate greater confidence of
the persons who may be affected by any order to be passed against them. In the
same token, we may mention that when in passing an order like the impugned one,
the Government has adopted the trial-and-error method, it would be in the
fitness of things if the matter is carried to its logical end so that any
future order passed contains the colour and quality of objectivity.
Secondly, could it not be possible for the
Government to allow the crushers to function by regulating the working hours or
to fix a quota of sugarcane to be delivered to the mills and the crushers in
the ratio of 60:40 or 70:30, as may be advised by the experts and to insist
that both the crushers and the mills should pay a uniform price to the cane
growers ? The counsel for the petitioners have brought to our notice a
disturbing element in the entire case which is that in the past although the
sugarcane growers supplied sugarcane on condition of payment to them of the
support price fixed. by the Government yet the mills did not pay the price to
the cane growers for a long time with the result that arrears accumulate
running into lakhs of rupees. It would indeed be extremely desirable for the
Government to take steps to see that payment of the price of the quantity of
the cane supplied to the mills or the crushers is paid against delivery or, at
any rate, within a reasonable time thereafter so as to provide a strong
incentive to the farmers to increase their production and earn substantial
profits by supplying the sugarcane to mills or crushers during the crushing
season (October to May).
Lastly, it was represented to us by the
petitioners that the crushers are used for the twin purpose of production of
khandsari sugar and gur, rab, etc., but as the crushers are sealed by the officers
of the Government, the owners are not in a position to produce 136 even gur or
rab on the production of which not only no ban has been imposed by the impugned
notification but the same has been completely exempted from the purview of the
notification. Thus it was asserted that the owners of crushers who want to
switch over to production of gur or rab, because of the ban imposed by the
Government on the production of khandsari may be allowed to do so. The Attorney
General, however, pointed out that if this course is adopted it will be
difficult to detect as to how many crushers are producing khandsari sugar in
the garb of gur or rab. Wherever any step for banning production is taken, the
Government has to evolve some procedure to detect the defaulters and with the
resources at its command, we cannot understand why a special staff cannot be
appointed on a temporary basis for looking after the compliance of the order by
the "crushers and making surprise checks periodically. Another method to
prevent the abuse of the privilege of production of gur or rab by producing
khandsari in a clandestine fashion may be to insert a condition in the licences
of the manufacturers of khandsari sugar that if they produce khandsari during
the period of the ban their licences would be cancelled.
The result is that all the contentions raised
by the petitioners except the one raised by Mr. Gupta that the introduction of
the word 'vertical' was violative of Art. 14 of the Constitution are rejected.
The word 'vertical' must be considered to have been deleted from the impugned
notification. Since the impugned notification has already spent its force. No
relief can be given even to the petitioners represented by Mr. Gupta. But, in
future the Government will bear in mind the infirmity pointed out. The
petitions, along with the Civil Appeal, are accordingly dismissed but in the
circumstances without any order as to costs.
N.V.K. Petitions and Appeal dismissed.
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