Sukhnandan Saran Dinesh Kumar & ANR
Vs. Union of India & ANR [1982] INSC 29 (3 March 1982)
DESAI, D.A.
DESAI, D.A.
VARADARAJAN, A. (J)
CITATION: 1982 AIR 902 1982 SCR (3) 371 1982
SCC (2) 150 1982 SCALE (1)165
ACT:
Sugar Cane (Control) Order 1966, Clauses 3,
3A, 4 and 4A & U.P. State Government Notification dated September 3, 1980.
Sugar Cane brought in bundles-Binding
material-Grant of rebate-Whether valid and reasonable.
HEADNOTE:
The raw material for manufacturing sugar or
Khandsari sugar is sugarcane. When the vacuum pan process is employed the end
product is called sugar and when the open pan process is employed the end
product is called Khandsari sugar. In order to extend protection to the farmers
who had undertaken raising of sugarcane crop, the Central Government issued the
Sugarcane (Control) Order 1966. Clause 3 of this Order conferred power on the
Central Government to fix minimum price of sugarcane to be paid by producers of
sugar for sugarcane purchased by them. Clause 4 conferred similar power to fix
the minimum price to be paid by the producers of khandsari sugar for the
sugarcane purchased. Clause 3A which was introduced on September 24, 1976
conferred power on the Central Government and various other authorities to
allow a suitable rebate in regard to the weight of the binding material not
exceeding 0.625 Kg. per quintal of sugarcane, when sugarcane was purchased by
the producer of the sugar. Later, Clause 4A was introduced on March 20, 1978 to
provide for the rebate that can be deducted from the price paid for sugarcane
by producers of khandsari sugar.
The State Government issued a notification on
September 3, 1980 to provide that where sugarcane is brought in bundles and is
weighed as such, a rebate in regard to the binding material at 0.625 Kg. per
quintal should be allowed.
As there was a printing error in mentioning
the figure '0.650 kg.' a corrigendum was issued to correct it, to '0.625 kg'
per quintal in the notification.
The petitioners in the writ petitions who
were manufacturing khandsari sugar by the open pan process assailed the
decision of the State Government allowing rebate. They contended that: (1) the
power to prescribe the rate of rebate under the third proviso to clause 4 is
conditional upon the fixing of the minimum price of sugarcane and as the
pre-condition for exercise of that power was not satisfied, the authorities
cannot exercise power to prescribe the rate of 372 rebate, (2) if the purchaser
and seller of sugarcane are free agents to negotiate the price no useful
purpose would be served by prescribing the rate of rebate statutorily. If
higher rebate is to be allowed, the producer of khandsari sugar and the grower
of sugarcane would work out the price accordingly and if less rebate is
allowed, it will have a direct impact on the negotiated price, (3) assuming
that the power to prescribe the rate of rebate under clause 4A read with the
third proviso could also be exercised where the price of sugarcane was left to
be negotiated between the growers of sugarcane and the producers of khandsari
sugar, the quantum of rebate determined must have a reasonable relation to the
reality of market situation as well as to prevalent trade practice, (4)
assuming that the Central Government was influenced by the report made by the Director,
National Sugar Institute the report suggests that the average works out at
0.741 kg per quintal, and consequently there was no justification for further
reducing it to 0.625 kg, (5) the notification places a restriction on the
freedom of trade guaranteed under Article 19(1) (g) and as it is neither
reasonable nor imposed in public interest, it is violative of freedom of trade
and therefore void, and (6) in order that a restriction may be reasonable it
must have a reasonable relation to the object which the statute seeks to
achieve and must not be in excess of that object.
Dismissing the writ petitions.
HELD: The State Government notification dated
September 3, 1980 directing that where sugarcane is brought in bundles and is
weighed as such a rebate in regard to the binding material at 0.625 kg per
quintal be allowed, is valid and legal. The rebate was statutorily prescribed
to ensure that sugarcane growers were not at the mercy of the producers of
sugar and khandsari sugar. The statutory rebate serves two- fold purpose: (i)
it ensures price of sugarcane avoiding impermissible deductions and (ii) it
circumvents fraud by making such deductions as would render illusory even the
negotiated price, if not fixed price. The restriction is undoubtedly reasonable
and is imposed in the interest of the general public and the guarantee of
freedom of trade is not violated.
[376 E; 392 H; 393 A-C]
1. (i) Though clause 3A was inserted in the
Control Order in 1976 conferring power on the Central Government or with the
approval of the Central Government, on the State Government to allow rebate at
0.625 kg. per quintal of sugarcane purchased by manufacturers of sugar, such
rebate was being prescribed by the Central Government since 1968.
[379 G] (ii) Clause 4 confers power on the
Central Government or a State Government with the concurrence of the Central
Government to fix the minimum price or the price of sugarcane to be paid by
producers of khandsari sugar for sugarcane purchased by them. Third proviso to
clause 4 provides that the Central Government or with the approval of the
Central Government the State Government to allow a suitable rebate in the price
so fixed. If the provision were to end with clause 4, the question may arise
whether the power to determine rate of rebate can be exercised de hors the
power to fix minimum price or price of sugarcane or can be unilaterally
exercised. But the language of the third proviso "...as it may specify,
allow a suitable rebate of the price so fixed", indicates that the rebate
is co-related to the price fixed. [381 C-F] 373 (iii) The rebate contemplated
by the third proviso to clause 4 is not necessarily confined to rate of rebate
for binding material only but permissible rate of rebate from the price or
minimum price fixed under the substantive provision of clause 4 can be
prescribed. [381 H; 382 A] (iv) Clause 4A stands on an independent footing and
it is independent of clause 4. Clause 4A is neither inter- dependent nor
interrelated to clause 4. Clause 4A visualises a situation in which either the
minimum price of sugarcane is fixed under clause 4 or where no such price if
fixed, the price agreed to between the sugarcane grower and the producer who
purchased sugarcane and even in this latter situation the power to prescribe
rate of rebate only in respect of binding material was conferred on the
authorities set out in the third proviso to clause 4A. Therefore, fixing of the
minimum price may be a pre-condition to the exercise of power under the third
proviso of clause 4, as far as clause 4A is concerned, even where the price to
be paid by the producer to the sugarcane grower is the one negotiated between
the two, the producer or his agent will have to allow that much rebate and no
more for binding material if notified under the third proviso. This literal
construction accords with the intendment of the provision. [382 B-E; 383 G]
2. (i) Sugarcane is a perishable commodity.
The grower of the sugarcane is at the mercy of producers of sugar or khandsari
sugar. It would be uneconomic for him to transport sugarcane to a long
distance. The product, being perishable and transport over a distance being
uneconomic, the grower of sugarcane has limited choice in selecting the
producer to whom it could be sold. Between the producer of khandsari and the
grower of sugarcane, the first one is primarily in a position to dominate and
dictate and they do not operate on the level of equality. The grower of
sugarcane in relation to the producer of the khandsari sugar would therefore be
weaker and requires to be protected. If the protection of fixing of minimum
price is not resorted to because the authorities have information that the
grower of sugarcane would be able to obtain a reasonably fair price for his
labour, the only thing which is required to be protected against is iniquitous.
unauthorised and impermissible deductions. In the States of Uttar Pradesh and
Bihar the weight of the binding material when sugarcane is brought in bundles
to the producer has been a fruitful source for the producers of khandsari sugar
to make deductions from the weight of sugarcane delivered to them in an
exorbitant quantity so as to deny in real money worth the negotiated price.
[382 H; 388 A-D] (ii) While retaining the power to fix minimum price or price
to be paid and also in a given situation leaving it to the purchaser of
sugarcane to negotiate the price in order to eschew any exploitation of the
weaker section between the two, the power to prescribe the rate of rebate was
acquired and it can be rightly enforced. There is therefore no merit in the
submission that unless the power to fix the price or minimum price is exercised
there is no power to prescribe the rate of rebate. [383 F-G]
3. The rate of rebate has been determined by
the law of averages after collection information from all over the country, and
the present rate of rebate 374 is in vogue for over a quarter of a century. It
is therefore difficult to accept the submission that the fixation of rate of
rebate for binding material at 0.625 kg. for the whole country is either
arbitrary or unreal or unrelated to trade and practice.
[376 G-H]
4. (i) The differential between what is
prescribed and what is calculated as average by the study of the National Sugar
Institute is not so wide as to render the prescribed rate arbitrary or
unrealistic. The differentials being within a narrow range, the one which is in
vogue for over a quarter of a century cannot be rejected as arbitrary or
unrelated to trade and practice. Nor is the Court competent to work out the exact
permissible rebate with mathematical accuracy.
[387 D-E] (ii) The rate of rebate set out in
the impugned notification bears resemblance to the sample testing of actual
weight of binding material used in binding sugarcane when brought in bundles to
the khandsari factory. [388 G] (iii) This does not however imply that no case
has been made for upward revision of the rebate. The Central Government may
realistically examine the same before the next crushing season commences. [388
G]
5. (i) It would be open to the producer of
khandsari sugar to buy sugarcane from the grower who may be asked to bring
sugarcane not bound in bundles. The rebate for binding material is to be
allowed only when sugarcane is brought to the khandsari sugar producing unit
bound in bundles. It is always open to the purchaser of sugarcane to insist
upon the grower bringing the sugarcane not bound in bundles and he is free to
negotiate the price of sugarcane is not fixed and the impugned notification
will not even remotely impinge upon his freedom to carry on his trade. The
restriction complained of therefore does not directly and proximately interfere
with the exercise of freedom of trade and Article 19(1) (g) is not attracted.
[389 E-G] (ii) Producers of sugar and khandsari sugar constitute powerful trade
lobby, and this can be taken judicial notice.
Sugar being an essential commodity
occasionally kept in short supply and being a commodity needed for consumption
by almost the entire population, the powerful industry magnates are in a position
to dominate both the growers of sugarcane as also the consumers of the
essential commodity. Number of regulations have been enacted to regulate this
powerful combination of manufacturers of sugar and khandsari sugar all over the
country for the ultimate benefit of consumers, the farmers-the growers of
sugarcane. The marginal farmers, are unable to stand up against the organised
industry and need protection for selling at fair price their meagre
agricultural produce. [391 D-G] (iii) Sugarcane growers who are farmers cannot
negotiate on the footing of equality with the producers of sugar and khandsari
sugar. The State action for the protection of the weaker sections is not only
justified but absolutely necessary unless the restriction imposed is excessive.
If price or minimum price of sugarcane is fixed, the producers of sugar would
try to circumvent the price or minimum price by unrealistic and impermissible
deductions.
The rebate for weight of binding material
seems to be a source for indulging in this nefarious, if not wholly fraudulent
conduct.
6. To strike the balance between the
conflicting interests not only the State acquired power to fix minimum price of
sugar and khandsari sugar but that this wholesome effort may not work to the
disadvantage of the sugarcane growers another weaker section of the society,
the power to prescribe rate of rebate was acquired. And the power to fix price
or minimum price comprehends the power to so regulate supply as to ensure the
price so fixed and to ensure that in the name of unauthorised and unwarranted
deduction the price fixed or negotiated is not rendered illusory. [393 G-H; 394
A]
ORIGINAL JURISDICTION: Writ Petition Nos.
6443-44/80, 8829-30, 9123-24, 370-87, 777-796, 658-62, 732-63, 824-31, 847-62,
1080-1103, 1131-52, 8916, 9071-74, 9130-32, 9176-79, 8965, 8971-72, 9347-48,
9352-67 of 1981.
(Under Article 32 of the Constitution of
India) AND Writ Petitions Nos. 14-19/82, 333-25, 458-96, 1307-17, 1410-13,
1595, 8268-72 of 1981 and 152 of 1982.
(Under article 32 of the Constitution of
India) C.M. Lodha. in W. P. No. 6443-44/80, Shanti Bhushan, in WP. Nos. 732-63,
3423-25/81-S.N. Kackar, in W.P. 777-96 & 1131-52 of 81; R.K. Jain, S.
Mitter, K.K. Mohan, N.S. Das Bahl, Rameshwar Dial and Madan Gopal Gupta for the
Petitioners.
G.N. Dikshit and Mrs. Shobha Dikshit for
Respondents.
Girish Chandra and Miss A. Subhashini for
Union of India in W.P. Nos. 6443-44/80.
The Judgment of the Court was delivered by:
DESAI, J. Even an innocuous marginally
regulatory measure affecting the sugar trade at fringes is sufficient for this
powerful industry to invade the courts with petitions galore almost proclaiming
that there should be hands off policy in respect of this trade. The filimsty
albeit untenable grievance made in this group of petitions would underscore the
truth of what is just stated.
In exercise of the power conferred by clause
(4) third proviso of the Sugarcane (Control) Order, 1966, (Control Order' for
short), the 2nd respondent-State of Uttar Pradesh, with the permission of 376
the 1st respondent Union of India, issued Notification dated September 3, 1980,
which is impugned in these petitions. The impugned Notification reads as under:
"Sr. No. 398 A (Ka) 13-38-16, 56
Government Gazette, U.P. Extraordinary Legislative Supplement Part 4, Section
(b) (Kha) ...Order Lucknow, Wednesday, 3rd September, 1980.
Notification P.As.-306 In exercise of the
powers conferred by clause 4 proviso 3 of the Sugarcane Control Order, 1966,
the Governor, with the permission of the Central Government, allows in Uttar
Pradesh in respect of Khandsari units, producing Gur, rab or Khandsari sugar,
where sugarcane is brought in bundles and is weighed as such, a rebate in
regard to the binding material at 0.650 kilograms per quintal.
By Order, R. Basudev, Secretary" It was
stated that there was a printing error in mentioning the figure '0.650 kg.' and
a corrigendum has been issued to correct it to '0.625 kg.' per quintal in the
Notification.
The allegations in all the petitions are identical
and, therefore, we would state a few representative facts from the writ
petition filed by M/s. Sukhnandan Saran Dinesh Kumar and Another. The
petitioners are producers of sugar by open pan process, the product being
described as Khandsari sugar. This term is to be understood in
contra-distinction to the marketable commodity called 'sugar' which is produced
by vacuum pan process. The raw material for manu- 377 facturing sugar or
Khandsari sugar is sugarcane. The petitioners have set up a factory for manufacturing
khandsari sugar by open pan process. The petitioners buy sugarcane from the
sugarcane growers. In order to extend protection to the farmers who have
undertaken raising of sugarcane crop, the Central Government issued the Control
Order in exercise of the power conferred by section 3 of the Essential
Commodities Act, 1955. By clause 3 of this order, power was conferred on the
Central Government to fix minimum price of sugarcane to be paid by producers of
sugar for sugarcane purchased by them. Clause 4 confers similar power to fix
the minimum price to be paid by the producers of khandsari sugar for sugarcane
purchased by them. Other clauses of the Order for the present purpose are not
relevant. Clause 3A was introduced by GSR 815 (E)/ESS.
COM./Sugarcane dated September 24, 1976,
which, inter alia, conferred power on the Central Government and various other
authorities mentioned therein to allow a suitable rebate in regard to the weight
of the binding material not exceeding 0.625 kg, per quintal of sugarcane, when
sugarcane was purchased by the producer of sugar. Subsequently, by Notification
GSR 197 (E)/Ess. Com./Sugarcane dated March 20,1978, Clause 4A with the
marginal note "Robate that can be deducted from the price paid for
sugarcane by producers of Khandsari sugar" was introduced. Clauses 4 and 4
A are material for the present discussion and they may be extracted:
"4. Minimum price of sugarcane payable
by producers of Khandsari sugar:- The Central Government or a State Government,
with the concurrence of the Central Government, may, by notification in the
Official Gazette, from time to time, fix the minimum price or the price of
sugarcane to be paid by producers of khandsari sugar or their agents for the
sugarcane purchased by them:
x x x Provided also that the Central
Government or, with the approval of the Central Government, the State
Government, may in such circumstances and subject to such con- 378 ditions as
it may specify allow a suitable rebate in the price so fixed." *"4A.
Rebate that can be deducted from the price paid for sugarcane by producers of
khandsari sugar:
A producer of khandsari sugar or his agent
shall pay, for the sugarcane purchased by him, to the sugarcane grower or the
sugarcane growers' co-operative society, either the minimum price of sugarcane
fixed under clause 4, or the price agreed to between the producer or his agent
and the sugarcane grower or the sugarcane growers' co. operative society, as the
case may be (hereinafter referred to as the agreed price:) Provided that:
x x x x x x (iii) Where the sugarcane is
brought bound in bundles and weighed as such, the Central Government, or, with
the approval of the Central Government, the State Government or the Director of
Agriculture or the Cane Commissioner or the District Magistrate within their
respective jurisdiction, may allow a suitable rebate in regard to the weight of
the binding material not exceeding 0.625 Kilograms per quintal of sugarcane; and,
x x x Clause 4 conferred power on the Central Government or a State Government
with the concurrence of the Central Government to fix the minimum price or the
price of sugarcane to be paid by producers of khandsari sugar or their agents
for the sugarcane purchased by them. The second and third proviso to clause 4
were simultaneously introduced with clause 4A. By the Third proviso to clause
4, power was conferred on the Central Government or 379 with the approval of
the Central Government on the State Government to allow a suitable rebate in
the price fixed in exercise of the power conferred by clause 4. The purpose
underlying the proviso is manifest. If the minimum price or price of sugarcane
to be paid by producers of khandsari sugar is fixed, it is incumbent upon the
producers of khandsari sugar to pay that price and nothing less than that price
on the pain of criminal prosecution. The authorities clearly envisaged a
situation where sugarcane may be brought in bundles to the unit manufacturing
khandsari sugar and if the sugarcane is weighed with the binding material used,
the minimum price or price fixed by the Government to be paid per quintal of
sugarcane would ipso facto include the weight of the binding material and if
the power to grant rebate is not conferred the producer of khandsari sugar will
be under an obligation to pay the same price even if the part of the payment
was for something other than sugarcane, namely, binding material. The raison
d'etre behind conferring this power is thus clearly discernible.
Clause 4A made it obligatory to pay the
minimum price of sugarcane if so fixed under clause 4 or in the absence of
price fixation, the negotiated price. Proviso (iii) to clause 4A confers power
to allow rebate not exceeding 0.625 kg. per quintal of sugarcane where
sugarcane is brought in bundles and is weighed as such, i.e. with the binding
material. Armed with this power, the 2nd respondent after obtaining approval of
the Central Government, as per letter dated September 6, 1979, issued the impugned
notification directing that where sugarcane is brought in bundles and is
weighed as such a rebate in regard to the binding material at 0.625 kg. per
quintal be allowed.
Before adverting to the contentions raised in
this group of petitions it may be made distinctly clear that though clause 3A
was inserted in the Control Order in 1976 conferring similar power on the
Central Government or with the approval of the Central Government, on the State
Government to allow rebate at 0.625 kg. per quintal of sugarcane purchased by
manufacturers of sugar, such rebate was being prescribed by the Central
Government since 1968.
The Gazettes of India setting out the
notifications for the years 1968, 1971, 1972 and 1975 were shown to us. The
notifications were issued in exercise of the power conferred by clause 3 of the
Sugarcane Control Order, 1966. By the notifications hereinabove referred to
minimum price of sugarcane per quintal payable by each sugar mill enumerated in
the Schedule to the notification was fixed.
380 While fixing this minimum price the
Central Government authorised itself as also conferred power on the State
Governments or the Commissioner or Director of Agriculture within their
jurisdiction to allow a suitable rebate in regard to the weight of binding
material not exceeding 0.625 kg. per quintal of sugarcane. It thus clearly
transpires that the power to fix the minimum price of sugarcane comprehended
the power to fix rebate to be allowed for binding material where sugarcane is
brought to the factory or the producing centre bound in bundles. However, to
avoid any quibbling about the power to fix such rates of rebate, clause 3A was
added in 1976 and an identical clause 4A was added in 1978 acquiring power to
prescribe rebate to be allowed for binding material where sugarcane is brought
to the khandsari sugar producing units bound in bundles and weighed as such.
This would at least show that since 1968 rebate at 0.625 per quintal of
sugarcane purchased by producers of sugar is being allowed. Sugarcane is a raw
material both for sugar and khandsari sugar, the distinction between them being
that when vacuum pan process is employed the end product is called sugar and
when open pan process is employed the end product is called khandsari sugar. In
case of either of them, the grower of sugarcane has hardly anything to do with
the end product. After the grower sells his sugarcane, as far as he is
concerned, it is immaterial whether the producer produces sugar or khandsari
sugar or rab or jaggery or shakkar. Therefore, clause 4A was introduced to
avoid discrimination between producers of sugar and khandsari sugar in the
matter of rebate to be allowed when the grower of sugarcane brings the same
bound in bundles to be delivered to the producer. The producers of sugar have
without a murmur accepted this position but once the producers of khandsari
sugar are brought within the purview of an identical provision, they have filed
the present petitions.
Mr. C.M. Lodha who led on behalf of the
petitioners contended that the power to prescribe rate of rebate under third
proviso to clause 4 is conditional upon the fixing of minimum price or price of
sugarcane, and as the pre- condition to exercise of power is not satisfied, the
authorities cannot exercise power to prescribe rate of rebate. The submission
is that where minimum price of sugarcane is fixed by the Government, in order
to ensure that that price is paid for sugarcane and simultaneously to avoid any
unauthorised deduction, the Central Government or the State Government may
prescribe the rate of rebate to be allowed beyond which no deduction 381 under
the camouflage of rebate for binding material can be resorted to by the
purchaser; but if the power to fix minimum price or price of sugarcane is not
exercised, there does not arise a situation in which the power to prescribe
rebate to be allowed for binding material can be exercised.
It was urged that the power to fix price or
minimum price of sugarcane and to prescribe rate of rebate are not independent
but they are inter-dependent and one cannot be exercised without exercising the
other.
Clause 4 confers power on the Central
Government or a State Government with the concurrence of the Central Government
to fix the minimum price or the price of sugarcane to be paid by producers of
khandsari sugar for sugarcane purchased by them. Third proviso to clause 4
provides that the Central Government or with the approval of the Central
Government, the State Government may in such circumstances and subject to such
conditions as it may specify, allow a suitable rebate in the price so fixed. If
the provision were to end with clause 4, a serious contention would arise
whether the power to determine rate of rebate can be exercised de horse the
power to fix minimum price or price of sugarcane or can be unilaterally
exercised. Undoubtedly, if the power was exercised under clause 4 probably the
pre-condition to exercise of power of prescribing suitable rebate viz. fixing
of minimum price or price of sugarcane if not satisfied, the power to prescribe
rate of rebate could not have been exercised because the latter power for its
exercise is dependent upon the power to fix price or minimum price. Both the
powers are interrelated as would be evident from the language of third proviso:
"...as it may specify, allow a suitable
rebate in the price so fixed." The rebate is thus co-related to price
fixed.
Therefore prima facie it appears that the
power to fix rate of rebate under the third proviso to clause 4 cannot be
exercised without exercising the power to fix price or minimum price. It being
a conditional power, the satisfaction of condition giving rise to the occasion
to exercise of power is a must. Therefore, before the rate of rebate is
prescribed the price or the minimum price of sugarcane as provided in the
substantive part of clause 4 will have to be fixed. From the price so fixed a
rebate has to be allowed and, therefore, the power was conferred by the third
proviso to prescribe the rate of rebate. The rebate contemplated by the third
proviso to clause 4 is not necessarily confined to rate of rebate for binding
material only but per- 382 missible rate of rebate from the price or minimum
price fixed under the substantive provision of clause 4 can be prescribed.
Clause 4A stands on an independent footing
and it is independent of clause 4. Clause 4A is neither inter- dependent nor
interrelated to clause 4. Clause 4A provides that the producer of khandsari
sugar or his agent shall pay for the sugarcane purchased by him to the
sugarcane grower or the sugarcane growers' cooperative society either the
minimum price of sugarcane fixed under clause 4 or the price agreed to between
the producer or his agent and the sugarcane grower or the sugarcane growers'
co-operative society as the case may be. Clause 4A thus visualises a situation
in which either the minimum price of sugarcane is fixed under clause 4 or where
no such price if fixed, the price agreed to between the sugarcane grower and
the producer who purchased sugarcane and even in this latter situation the
power to prescribe rate of rebate only in respect of binding material was
conferred on the Central Government or the authorities set out in the third
proviso to clause 4A. Therefore, fixing of the minimum price may be a
pre-condition to the exercise of power under the third proviso of clause 4, as
far as clause 4A is concerned, even where the price to be paid by the producer
to the sugarcane grower is the one negotiated between the two, the producer or
his agent will have to allow that much rebate and no more for binding material
if notified in exercise of the power conferred by the third proviso. This
literal construction accords with the intendment of the provision as would be
presently pointed out.
Mr. Lodha urged that if the purchaser and
seller of sugarcane are free agents to negotiate the price, what useful purpose
would be served by prescribing the rate of rebate statutorily ? Says Mr. Lodha,
that if higher rebate is to be allowed, the producer of khandsari sugar and the
grower of sugarcane would work out the price accordingly and if less rebate is
allowed, it will have a direct impact on the negotiated price. This submission
proceeds on the unwarranted assumption that a producer of khandsari sugar and
the grower of sugarcane are capable of negotiating the price as free agents and
stand on a footing of equality.
Sugarcane is a perishable commodity. The
grower of the sugarcane is at the mercy of producers of sugar or khandsari
sugar. It would be uneconomic for him to transport sugarcane to a long
distance. By the very nature of the product, it being perishable and transport
383 over a distance being uneconomic, the grower of sugarcane has limited
choice in selecting the producer to whom it could be sold. Between the producer
of khandsari and the grower of sugarcane, the first one is primarily in a
position to dominate and dictate and they do not operate on the level of
equality. Unquestionably, therefore, the grower of sugarcane in relation to the
producer of the khandsari sugar would be weaker and it is he who requires to be
protected. Now, if the protection of fixing of minimum price is not resorted to
because the authorities under the Control Order may have information before
them that looking to the supply and demand and the demand and the market
economy, the grower of sugarcane would be able to obtain a reasonably fair
price for his labour, the only thing which is required to be protected against
is iniquitous, unauthorised and impermissible deductions. It appears that in
the State of Uttar Pradesh and Bihar the weight of the binding material when
sugarcane is brought in bundles to the producer has been a fruitful source for
the producers of khandsari sugar to make deductions from the weight of
sugarcane delivered to them in such an exorbitant quantity as to deny in real
money worth the negotiated price. This can be demonstrably established by the
claim made in these petitions that the weight of binding material is 2.5 kg.
per quintal of sugarcane while the authorities have prescribed only 0.625 kg.
per quintal of sugarcane and the national average as worked out by National
Sugar Institute, Kanpur is 0.741 kg.
per quintal of sugarcane. If the price of
sugarcane is fixed per quintal and the deduction is made as contended herein,
it does not require imagination or mathematician's intellect to work out the
invisible loss inflicted by the subtle method on the growers of sugarcane.
Therefore, while retaining the power to fix minimum price or price to be paid
and also in a given situation leaving it to the purchaser of sugarcane and
grower of sugarcane to negotiate the price in order to eschew any exploitation
of the weaker section between the two, the power to prescribe the rate of
rebate was acquired and can be rightly enforced. Therefore, viewed from either
angle, there is no merit in the submission that unless the power to fix the
price or minimum price is exercised there is no power to prescribe the rate of
rebate.
Language of clause 4A on a literal or
grammatical construction negatives the submission and it must as well be
rejected looking to the intendment underlying this provision.
Mr. Shanti Bhushan, learned counsel appearing
for the petitioners in Writ Petitions No. 732 to 763 urged that assuming that
384 power to prescribe rate of rebate under clause 4A read with the third
proviso could also be exercised where price of sugarcane may be left to be
negotiated between the growers of sugarcane and producers of khandsari sugar,
yet the quantum as determined must at least have reasonable relation to the
reality of market situation as well as prevalent trade practice. He urged that
viewed from this angle fixation of rate of rebate at 0.625 kg. per quintal of
sugarcane is unjust and unfair and therefore the Court should strike down the
impugned notification on the ground that the determination is arbitrary and
utterly unrelated to trade and practice. Simultaneously he contended that
assuming that national average of weight of binding material works out at 0.741
kg. per quintal as submitted by the Respondents on the strength of the report
of National Sugar Institute, Kanpur, there was absolutely no justification for
reducing the same to 0.625 kg. per quintal and therefore prescribed rate of
rebate apart from being arbitrary is unrelated to trade and practice and
deserves to be quashed.
In this connection, he referred to Paragraph
6 of the counter-affidavit filed by Shri H.A.M.L. Vaz, Deputy Secretary,
Ministry of Agriculture, Department of Food in which it is stated as under:
"The limit of 625 grams per quintal was
adopted, as it was allowed by the States of U.P. and Bihar before the Central
Government took over the control over the price of sugarcane, and has continued
since then. Representations were received from the Associations of the
vacuum-pan sugar mills etc. against that limit. A survey was carried out by the
National Sugar Institute, Kanpur, and the average weight of the binding
material worked out to 0.741 kg., per quintal for the winter season of the
selected factories spread over the whole country. Subsequently, on receipt of a
representation from the Madras State Federation of Co- operative Sugar
Factories, views of the State Governments in the matter were also called for,
with the specific request that they might also ascertain the views of the cane
growers. The major sugar producing State Governments of U.P., Punjab,
Rajasthan, Maharashtra, Karnataka, Andhra Pradesh, Pondicherry, West Bengal,
Orissa, Madhya Pradesh, Kerala and Gujarat, recommended that the limit already
prescribed was adequate and that there was no need to revise it.
The Bihar Government had already indicated
the same view. Hence fixation 385 of that limit cannot be said to be unreal and
arbitrary or contrary to actualities of trade and practice." Petitioners
countered it by the affidavit in rejoinder of Shri Prem Parkash Aggarwal; the
relevant portion of para 4 reads as under:
"With reference to Para 6 of the
counter-affidavit I say that to the best of my information no survey was
carried out at any time after 1976. It is to the best of my information that
National Sugar Institute, Kanpur, conducted some kind of survey in 1964 or
earlier." This half-hearted lack of knowledge would not be sufficient to
reject what Mr. Vaz stated in his counter-affidavit.
However, to put this factual averment beyond
the pale of controversy Mr. Girish Chandra, learned advocate who appeared for
the Union Government produced a file of the Department of Food, Sugar Policy
Desk, in which claim for upward revision of allowance for binding material presently
allowed under Sugar (Control) Order, 1966 in the light of the suggestions
received from Indian Sugar Mills Association as per its letter dated July 14,
1977 has been meticulously examined. It appears that Indian Sugar Mills
Association approached the Central Government requesting it for upward revision
of the rebate for binding material till then granted under the Control Order.
Indian Sugar Mills Association appears to be the spokesman of the sugar
industry. Probably a grievance was voiced that while producers of sugar are
under a statutory obligation to grant the prescribed rate of rebate, the
producers of khandsari sugar are under no such obligation even though they
purchase sugarcane from the the same market. Accordingly while examining the
question whether any upward revision in the rate of rebate should be allowed to
the producers of sugar who purchase sugarcane, it was decided to simultaneously
introduce an identical provision in respect of purchase of sugarcane by
producers of khandsari sugar. That is the genesis of the introduction of clause
4A in the Control Order. The file meticulously examines the suggestion for
upward revision of the rate of rebate. It clearly transpires from the file that
a circular letter was sent to all the governments of sugar producing states
requesting them to intimate their view on the desirability or otherwise of any
upward revision in the existing quantum of rebate of 0.625 kg. per quintal in
respect of the weight of the binding material 386 where sugarcane is brought
bound in bundles and weighed as such. It may be briefly mentioned that Punjab,
Gujarat, Karnataka and U.P., did not consider it necessary to grant any upward
revision. On the other hand, Tamilnadu, Kerala, West Bengal, Pondicherry,
Haryana, Rajasthan and Orissa were of the opinion that there is some
justification for an upward revision not exceeding 1 kg. per quintal. The State
of Bihar took a neutral stand stating that in Bihar, sugarcane is not supplied
bound in bundles and therefore the question of giving any rebate in respect of
binding material does not arise. After ascertaining the views of the different
State Governments, the department was of the view that since the views of the
State Governments are sharply divided, a request may be made to Director,
National Sugar Institute, Kanpur to carry out an independent study in regard to
the quantum of rebate that should be given for binding material, to enable the
Government to take a final decision, on the request of the industry for upward
revision of the existing rebate of 0.625 kg per quintal. This is the genesis of
the report of the Director, National Sugar Institute referred to in Para 6 of
the counter-affidavit.
The summary of the report of the Director,
National Sugar Institute, Kanpur was examined and it was observed that the
percentage of the binding materials varies from State to State and ranges
between 0.64 to 1.5% except in Orissa where it is found to be 3.00%. When the
matter was still under consideration of the Department, the present writ petitions
were field. It was observed that the present rate of rebate is in force for the
last over 20 years, so far as the vacuum-pan sugar manufacturers are concerned
and the same can be applied to the khandsari sugar manufacturers also.
Probably further examination of the request
for upward revision came to be stalled in view of the fact that the present
writ petitions were filed.
In the light of the fact situation
hereinabove set-out, it is difficult to accept the submission that the fixation
of rate of rebate for binding material at 0.625 kg. for the whole country is
either arbitrary or unreal or unrelated to trade and practice. The rate of
rebate seems to have been determined by the law of averages after collecting
information from all over the country. Coupled with this is the fact that the
present rate of rebate is in vogue for over a quarter of a century. It in
itself is sufficient to negative the contention that the rate of rebate is
fixed arbitrarily or unrelated to trade and practice.
387 The next submission is that assuming that
the Central Government was influenced by the report made by the Director of the
National Sugar Institute, Kanpur, the report suggests that the average works
out at 0.741 kg, per quintal, being approximately the mean between 0.64 and
1.5%. Therefore, it was vehemently urged that there was no justification for
further reducing it to 0.625 kg. When the determination has to be made on law
of averages and applicable to the whole country, the final figure cannot be
mathematically determined. If the existing rate of rebate, determined on the
national average is marginally higher or lower than the average worked out by a
later study team, it cannot be said that the existing prescription is arbitrary
or unrelated to trade or practice No doubt, if the range is wide, and the gap
is unexplained, realistic redetermination may be directed. According to the
average worked out by the Director of the National Sugar Institute, all India
average rate of rebate would work out at 0.741 kg. per quintal while the
Government has been fixing for over a quarter of a century the rate of rebate
at 0.625 kg. per quintal. Thus the differential between what is prescribed and
what is calculated by the study is not so wide as to render the prescribed rate
arbitrary or unrealistic. The differentials being within a narrow range, the
one which is in vogue for over a quarter of a century cannot be rejected as
arbitrary or unrelated to trade and practice. Nor is the Court competent to
work out the exact permissible rebate with mathematical accuracy.
A reference at this stage to a piece of
evidence furnished by the petitioners would suffice to repel the contention of
the petitioners that the average weight of binding material is 2.5 kg. per
quintal and, therefore, the prescribed rate is not merely marginally low but
wholly unrealistic. Annexure I to the rejoinder affidavit filed by Shri Prem
Prakash Aggarwal, Secretary of Gur Khandsari Utpadak Sangh, Roorkee, dated
December 24, 1981, purports to be a report of the Assistant Sugarcane
Commissioner on his visit to M/s Anand Prakash Atulkumar, a Khandsari sugar
producing unit on January 25, 1978. He was accompanied by Shri Shanker Shukla,
Khandsari Officer, Sarvashri S.D.
Verma, R.C. Kureel, Deoband and Navin Chandra,
Khandsari Inspectors. In order to ascertain the average weight of binding
material a truck loaded to its full capacity with sugarcane was weighed. The
gross weight was 37 quintals and 36 kgs. Shri Shobha Ram, the owner of the
sugarcane was directed to 388 remove the joon (binding material) of sugarcane.
The weight of M. Trolly was found to be 21 quintals and 40 kgs.
Subtracting the weight of trolly from the
gross weight, the weight of sugarcane with binding materials worked out at 15
quintals and 96 kgs. Then followed the calculation which may be extracted:
"The above farmer (kastkar) also
reported that the sugarcane was being purchased at Rs. 9. 10 p. per quintal.
Approximately about 1800 quintals cane was lying at site. The weight of the
joon (binding material) after it had been removed came to 32 kgs." If the
actual weight of the binding material in respect of 1800 quintals of sugarcane
turned out to be 32 kg., obviously per each quintal it would be much less than
0.625 kg. Mr. Shanti Bhushan, however, attempted to urge that the last sentence
in the Report is disjointed and misplaced and he wanted us to read the Report
as meaning that the weight of sugarcane in the trolly was 15.96 kg. and that
the weight of the binding material in respect of the same was 32 kg.
and, therefore, on an average it would work
out at 2 kg. per quintal. It is not possible to read the Report in the manner
indicated by Mr. Shanti Bhushan. In fact, the Report was produced on behalf of
the petitioners and not a word has been stated in the affidavit to which it is
annexed as to how the Report is to be read. It would thus appear that the rate
of rebate set out in the impugned Notification bears resemblance to the sample
testing of actual weight of binding material used in binding sugarcane when
brought in bundles to the khandsari factory.
Our rejection of the submission should not be
interpreted to imply that no case is made out for upward revision of the rate
of rebate for binding material. There is by the law of average as recently
worked out in 1980-81, an examinable case for revision up to at least 0.741 kg.
per quintal. We do not purport to indicate the figure as a judicial
pronouncement but we believe that the Central Government would continue its
examination of the request made by Indian Sugar Mills Association, shelved
because of these petitions, for upward revision and realistically examine the
same as early as possible and before the next crushing season commences. With
this we reject the submission that the fixation of rate of rebate at 389 0.625
kg. per quintal in the impugned notification is arbitrary or unrelated to trade
and practice.
Mr. Kackar, learned counsel who appeared in
Writ Petitions 777-796 and 1131-52/81 urged that the impugned notification
places a restriction on the freedom of trade guaranteed to the petitioners
under Article 19 (1) (g) and as it is neither shown to be reasonable nor
imposed in public interest, it is violative of the freedom of trade and is,
therefore, void.
Whenever it is contended that a regulatory
measure imposes restriction upon the freedom of trade guaranteed by Articles 19
(1) (g), it must be shown that the restriction so imposed directly and
proximately interferes in presenti with the exercise of freedom of trade. If
the alleged restriction does not directly or proximately interfere with the
exercise of freedom of trade, the freedom guaranteed by Article 19 (1) (g) is
not violated. Petitioners contend that they have a right to carry on trade on
manufacturing khandsari sugar and for facilitating the carrying on of this
trade they have to buy the raw material called sugarcane.
When they buy sugarcane in the absence of
minimum price for sugarcane the sugarcane grower and the producer of khandsari
sugar are free to negotiate the price. The negotiated price would take care of
the condition in which sugarcane should be supplied. It would be open to the
producer of khandsari sugar to buy sugarcane from the grower who may be asked
to bring sugarcane not bound in bundles. The rebate for binding material is to
be allowed only when sugarcane is brought to the khandsari sugar producing unit
bound in bundles. It is always open to the purchaser of sugarcane to insist
upon the grower bringing the sugarcane not bound in bundles and he is free to
negotiate the price when price or minimum price of sugarcane is not fixed and
the impugned notification will not even remotely impinge upon his freedom to
carry on his trade. Therefore, the short answer is that the restriction
complained of does not directly and proximately interfere with the exercise of
freedom of trade and Article 19 (1) (g) is not attracted.
Assuming that the impugned notification
making it obligatory to grant rebate for binding material when sugarcane is
brought bound bundles to the extent prescribed in the impugned notifica- 390
tion does impose a restriction on the freedom to carry on trade, the next
question is, whether the restriction is reasonable and imposed in the interest
of general public.
Once it is assumed that the impugned notification
imposes a restriction on the freedom of trade, the burden is on those who
support it, to show that the restriction imposed by the impugned law is
reasonable and is imposed in the interest of general public. In other words,
the burden is on those who seek the protection of clause (6) of Article 19 not
on the citizen who says that the restrictive enactment is invalid (see Saghir
Ahmad v. The State of U.P. & Ors.,(1) Khyerbari Tea Co. Ltd. & Anr. v.
The State of Assam(2) and Vrajlal Manilal & Co. and Ors. v. State of Madhya
Pradesh & Ors.,(3). It is of course not necessary to recall the dissent of
Sarkar, J. in Khyerbari Tea Co. Ltd. case. The learned judge was of the view
that the whole theory of burden of proof rests on the assumption that clause (6)
of Article 19 carves out an exception and that the burden to prove that the
case is covered by the exception is on him who pleads the same, but it was
observed that this way of reading the Constitution is not proper and one may
legitimately say that there is no exception because the real fundamental right
is what is left after the restriction has been imposed. Consistently with the
majority view, the burden will be on the authority who claims the protection of
clause (6) of Article 19 to show that the restriction is a reasonable one and
that is imposed in the interest of general public.
Having settled the question of burden, the
passing submission made by Mr. Kacker may be dealt with. It was urged that in
the batch of petitions in which he appears neither the Union Government nor the
State of Uttar Pradesh has filed counter-affidavit and therefore, one can say
that no attempt has been made to justify the restriction. We are not disposed
to accept this submission because the Union Government has filed counter-affidavit
in Writ Petitions Nos. 6443-6444 of 1980 and all the petitions in this batch
raised identical contentions and were directed to be heard with Writ Petitions
Nos. 6443-6444 of 1980. Undeserved respect for processual justice may have
persuaded us to direct the Union Government to file a copy of the counter-
affidavit in each petition which we 391 consider superfluous. At any rate, the
petitioners in the petitions in which Mr Kacker appears, were supplied a copy
of the counter affidavit and therefore this passing submission must be
negatived.
If freedom of trade postulates, inter alia,
freedom to negotiate price for purchase and sale both the raw material and the
finished product, the control order confers power to fix price of sugarcane and
to that extent there is a restriction on freedom of trade. But the restriction
is not under examination here Even when he is left free to negotiate the price
where either the Central Government or with the approval of the Central
Government, the State Government does not fix minimum price or price of
sugarcane there is a further restriction on his freedom of negotiating the
price because he is statutorily bound to give rebate for the binding material
as prescribed in the impugned notification. To that extent one may give
credence to the contention that there is a marginal restriction on the freedom
of trade.
The statutory prescription of quantum of
rebate for binding material has been prescribed for the benefit of sugarcane
growers. Producers of sugar and khandsari sugar constitute a powerful trade
lobby, the fact of which one can take judicial notice. Sugar being an essential
commodity occasionally kept in short supply and being a commodity needed for
consumption by almost the entire population, the powerful industry magnates in
this field are in a position to dominate both the growers of sugarcane as also
the consumers of the essential commodity. Number of regulations have been
enacted almost since the dawn of independence to regulate this powerful
combination of manufacturers of sugar and khandsari sugar all over the country
for the ultimate benefit of consumers on the one hand and on the other hand the
farmers and the growers of sugarcane with their small holdings and raising a
perishable food crop. The marginal farmers, are unable to stand up against the
organised industry. It does not require long argument in this predominantly
agricultural society that the farmers having small holdings need protection for
selling at fair price their meagre agricultural produce. As far back as 1953,
the U.P. Legislature enacted U.P. Sugarcane (Regulation of Supply and Purchase)
Act, 1953, for rational distribution of sugarcane to factories, for its
development on the organised scientific line, to protect the interest of cane
392 growers and of the industry, etc. Constitutionality of this Act was
challenged on various grounds including one under Article 19 (1) (g) In Ch.
Tika Ramji & Ors. v. The State of Uttar Pradesh & Ors.,(1) this Court
repelled the challenge under Article 19 (1) (g) holding that the restriction
which is imposed upon the cane-growers in regard to sales of their sugarcane to
the occupiers of factories in areas where the membership of the Cane-growers
Co-operative Society if not less than 75 per cent of the total cane growers
within the area, is a reasonable restriction in the public interest designed
for safeguarding the interest of the large majority of growers of sugarcane in
the area and works for the greatest good of the greatest number. The
proposition is now beyond the pale of controversy that the State can impose a
restriction in the interest of general public on the right of a party to
contract where in the opinion of the Government the contracting parties are
unable to negotiate on the footing of equality. Constitutional validity of
statutes prescribing minimum wages has been founded on this proposition. The
principle can be effectively extended to the powerful sugar industry and the
cane growers because the cane growers admittedly are at a comparative disadvantage
to the producers of sugar and khandsari sugar who were described in the course
of arguments as sugar barons. It does not require an elaborate discussion to
reach an affirmative conclusion that sugarcane growers who are farmers cannot
negotiate on the footing of the equality with the producers of sugar and
khandsari sugar. The State action for the protection of the weaker sections is
not only justified but absolutely necessary unless the restriction imposed is
excessive.
Viewed from another angle, the impugned
restriction is entirely reasonable. If price or minimum price of sugarcane is
fixed, the producers of sugar would try to circumvent the price by unrealistic
and impermissible deductions. The rebate for the weight of binding material
seems to be a source for indulging in this nefarious, if not wholly fraudulent
conduct. It is equally well settled that the State can impose reasonable
restrictions under clause (6) of Article 19 to prevent fraud or where advantage
of a fraudulent conduct is sought to be taken (see M/s. Fedco (P) Ltd. v. S.N.
Bilgrami(1). The impugned restriction serves two-fold purpose: (i) it ensures
price of sugarcane avoiding impermissible deductions; (ii) it circumvents 393
possible frauds by making such deductions as would render illusory even the
negotiated price, if not fixed price. And it is indisputable that if the rebate
is not statutorily prescribed the cane growers will be at the mercy of the
producers of sugar and khandsari sugar. If price or minimum price of sugarcane
can be fixed by the State, because this power was never questioned before us,
this very power comprehends the power to provide such incidenta land ancillary
regulations which will ensure the price. Price fixation measure is for
protection of the farmer from the exactions of producers against which he
cannot protect himself. (See Lee Nebbia v. People of the State of New York)(1).
The impugned measure ensures price either fixed or negotiated and, therefore,
it is a restriction which is undoubtedly reasonable and is imposed in the
interest of general public and the guarantee of freedom of trade is not
violated.
The last submission is that in order that the
restriction may be reasonable it must have reasonable relation to the object
which the statute seeks to achieve and must not be in excess of the object. It
was urged that the Sugarcane Control Order was issued in exercise of power
conferred by section 3 of the Essential Commodities Act. One of the objects
sought to be achieved by the Essential Commodities Act, 1955, is to ensure
availability at fair price the essential commodity to the consumers. It was
further urged that one can visualise that the power to fix minimum price or
price of sugarcane may have a rational nexus to the object sought to be
achieved, namely, availability of sugar to the consumers at fair price. But it
was urged that prescribing the rate of rebate for binding material has no
relation with the aforementioned object.
This submission does not commend to us for
the obvious reason that the restriction is imposed in the interest of the cane
growers and the State while ensuring that sugar, a commodity of daily
consumption by almost everyone in this country, is available to everyone at a
fair price simultaneously wanted to ensure that the grower of sugarcane,
another weaker section of the society is not left to vagaries of the trade or
the powerful sugar industry. To strike the balance between the conflicting
interests not only State acquired power to fix minimum price of sugar and
khandsari sugar but that this wholesome effort may not work to the disadvantage
of the sugarcane growers section of the society, the power to prescribe rate of
rebate was acquired.
And the power to fix price or minimum price
comprehends the power to 394 so regulate supply as to ensure the price so fixed
and to ensure that in the name of unauthorised and unwarranted deduction the
price fixed or negotiated is not rendered illusory.
Viewed from either angle the restriction is
both reasonable and it is imposed in the interest of general public, and has a
rational relation to the object sought to be achieved by the Control Order.
These were all the contentions in this batch
of petitions and as none has merit in it, the petitions fail and are dismissed
with costs; hearing fee in one set.
N.V.K. Petitions dismissed.
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