Sugar Ltd. Vs. State of Bihar & Ors  INSC 39 (15 January 1997)
RAMASWAMY, S. SAGHIR AHMAD, G.B. PATTANAIK
O R D
These two appeals arise from the judgment of the Division Bench of the Patna
High Court, made on November
13, 1984 in Order No.
11 and Review Order arising thereunder the CWJC No. 2370/84.
admitted position is that the appellant factory had a `reserved area' under
Section 31 of the Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981
(for short, the `Supply Act') and had the sugarcane supplied by the growers.
The Central Government, exercising the power under Clause 3 of the Sugarcane
(Control) Order, 1966 (for short, the `Order') determined the minimum price for
sugarcane at Rs. 13.92 per quintal. The State Government announced on March 31, 1983 the price of Sugarcane at Rs. 20.50
per quintal. The cane growers supplied the sugarcane to the appellant, but the
appellant admittedly had paid the minimum price determined under the Order But
the difference between the price fixed under the Order and the price announced
by the State Government was not paid. As a consequence, the Collector save a
certificate of dues for realisation under the Revenue Recovery Act. Calling
those proceedings in question, the writ petition came to be filed. The
contention raised in the High Court as well as in this Court is that the
Central Government having determined the price of the sugarcane at Rs. 13.92
per quintal, the State Government was devoid of power to fix the price at Rs.
20.50 per quintal and, therefore, the Collector has no power to issue the
certificate of arrears; since what is due is the price fixed under the Order
which has already been paid, there is no due in accordance with law.
Y.V. Giri, learned counsel for the appellant, had contended that Section 42 of
the Supply Act prescribes only the power for fixation of the price in respect
of the units, namely, Khandasari Unit or any unit manufacturing sugar under
open pan process. Under the provision, the Government have no power to fix
higher price of sugarcane supplied to sugar factory than that is fixed for the Khandasari
fixation of the price at Rs. 20.50 per quintal is without any authority of law
or jurisdiction. For a certificate proceeding what is required to be proceeded
is the due in accordance with law but not in accordance with any order passed
by the State Government. The dues in accordance with the price fixed under
Clause 3 of the Order having been paid, the appellant is not due of any sugarcane
price payable to the cane growers and, therefore, the view taken by the High
Court is not correct in law. Even if there are dues, the same could be
recovered in a suit by the growers. We find no force in the contentions.
the Order. The object of the Order is to ensure that the cane growers should
not be compelled to sell their sugarcane at a price minimum to the price
prescribed by the Central Government under Clause 3 of the Order. In State of Madhya Pradesh vs. Jaora Sugar Mills Ltd. &
Ors. etc. [CA Nos. 1811-14/96] decided on October 10, 1996 by a Bench of two
Judges, to which two of us (K. Ramaswamy and G.B. Pattanaik, JJ.) were members,
considered the similar question and held thus:
3  determines "where a producer of sugar purchases any sugarcane from a
grower of sugarcane or from a sugarcane from a grower of sugarcane or from a
sugarcane grower's co-operative society, the producer shall, unless there is an
agreement in writing to the contrary between the parties, pay within fourteen
days from the date of delivery of the sugarcane to the seller or tender to him
the price of the cane sold at the rate agreed to between the producer and the
sugarcane grower of sugarcane growers' co-operative society or that fixed under
sub-clause (1), as the case may be, either a the gate of the factory or at the
cane collection centre or transfer or deposit the necessary amount in the Bank
Account of the seller or the co-operative society, as the case may be."
Clause (3A) to Rule 3 was introduced by way of an amendment made in GSR 62(E),
payment of the price within 15 days with interest on the delayed payment at the
rate of 15% per annum for the period of such delay beyond 14 days has been
it was covered by the Act.
(1) of Rule 3 fixes the minimum price of sugar payable by the purchase of the
sugarcane as fixed by the Central Government in the manner indicated therein.
(2) of Rule 3 is relevant for the purpose of this case which shows that
"no person shall sell or agree to sell sugarcane to a producer of sugar or
his agent, and no such producer or agent shall purchase or agree to purchase
sugarcane, at a price lower than that fixed under sub-clause (1)".
23(3) of the Act, also couched in similar language, enables to novate by
contract the minimum price fixed by the Central Government in respect of cess
payable to Government.
would clearly indicate that despite the fixation of minimum price under clause
(1) of Rule 3, by agreement between the sugarcane grower and the purchaser of
the sugarcane, they would be at liberty to agree to sell or purchase the
sugarcane at a higher price than that was fixed by the Central Government under
clause (1) of Rule
Only for postponement of payment beyond 14 days, there should be an agreement
in writing between the parties obviously with the concurrence of the Central
Government or authorised authority in that behalf. Thus, there is no statutory
prohibition in that behalf to pay higher price. That would be further clear by
Rule 3(2) which speaks of the contract between the parties for payment of
higher price of sugarcane fixed under clause (1) of Rule 3 pursuant to the
agreement or pursuant to the minimum price fixed by the Central Government
under Rule 3(1) of the Order.
Rule 3(1) and additional price fixed under Rule 5A, it was within the domain of
the contract between the sugarcane growers and the factories who could agree to
pay price higher than the minimum price fixed under the Order. What sub-rule
(2) of Rule 3 prohibits is the purchase or sale or agreement in that behalf,
for bargain to pay price lesser than the minimum rice fixed by the Central
Government. In other words, the sugarcane growers should not be compelled to
sell the sugarcane at a price lesser than what was prescribed by the Order.
we hold that there was no statutory prohibition at the relevant time to agree
to pay higher price than was fixed under the order." There is, thus, no
prohibition on payment of higher price, it is seen and it is not disputed that
there was an agreement by the Sugar Factory Owners Association with growers of
sugarcane entered in January 1983 wherein the price to the sugarcane at Rs.
20.50 per quintal was agreed to be paid. It is stated in the judgment of the
High Court that this was fixed after the agreement between the Millers
Association and the farmers at a meeting convened by the State Government and
the agreement was notified by the State Government. The High Court has also
stated that the appellant had played prominent part in fixation of the price
and it acted upon it till March 31, 1983.
What was contended in the High Court was that though the agreement was there,
since the Company is an independent entity in the eye of law, it is not bound
by such an agreement and, therefore, the appellant is entitled to resile from
the agreement with the farmers at that meeting convened by the State
Government. In Jaora's case this Court had held thus:
question is: whether such a higher price has been agreed to be paid to the
sugarcane growers, when contract has come into existence between the
respondents and the cane growers with the aegis of the appellants? As a facts,
except Kaluram, all representatives of other factories were present at the time
of the agreement dated March
21, 1976. As far as Kaluram
is concerned, on the first occasion he was present, but on the second occasion
when the meeting was adjourned, he was not present, it has been averred in the
counter- affidavit that the Secretary of the Sugarcane Factories Owners'
Association had contracted him when he was in the hospital and thereafter, the
agreement was entered into. Though, subsequently, an attempt was made by the
Secretary to wriggle out from it, the Government has stated that and the sugarcane
growers have also agreed for the same, we are of the considered view that he
was a consenting party and there was consensus ad idem to pay higher price of
sugarcane than the minimum price fixed by the Central Government and they acted
was no prohibition for oral agreement between growers and owners through the
service of the Cane Commissioners, a statutory authority to effect such
would thus be clear that the Cane Commissioner having power to compel the cane
growers to supply cane to the factory Khandasari unit, he has incidental power
and duty bound to ensure payment of the price of the sugarcane supplied by the
sugarcane grower. The price fixed or agreed is a statutory price and bears the
stamp of statutory first charge on the sugar and assets of the factory over any
other contracted liabilities to recover the price of the sugarcane supplied to
the factory of Khandasari unit.
it would be seen that the Act regulates the recovery as arrears of land
revenue. According, demand has been for payment of the amount in a sum of Rs. 6,34,166/-
in CA No. 1813/80, Rs. 13,40,700/- in Can No. 1814 and Rs. 2,71,000/- in Ca No.
1812/80. Thus, the demands issued against the respondents are in accordance
with the provisions of the Act and they are liable to pay the same." It is
not in dispute that under Section 31 of the Supply Act, the State Government
has power to fix the reserved area, in other words, zone was carved out for the
appellant for the supply of sugarcane to the factory. All the farmers who are
cultivating the sugarcane within that zone are bound by the State action to
supply sugarcane to the factories within that reserved area. Consequently, the
factory also is bound by the actions of the State Government. Obviously, pursuant
to the obligation had by the State under the Supply Act, the meeting was
convened by the State Government whereat the factory owners' Association and
farmers participated and agreed to fixed the price at Rs. 20.50 per quintal of
sugarcane. As a consequence, both the cane growers as well as the owners of the
factory are bound by the decision. This having been agreed upon, the price
fixed by the State Government in excess of the minimum price fixed by the
Central Government under Clause 3 of the Order would be the price fixed for
supply of sugarcane and the Government would be entitled to enforce the
liability. As a consequence, the Collector was empowered and duty bound to
issue a certificate of the dues as arrears of land revenue for recovery under
the Revenue Recovery Act. The certificate obviously relates to the difference
between the minimum price fixed by the Central Government, i.e., Rs. 13.92 per
quintal and the price of Rs. 20.50 determined by the agreement between the
parties. Under the circumstances, there need not be any separate agreement to
be entered into between the cane growers in the reserved area and the
appellant's factory to be enforceable. We hold that the certificate issued by
the Collector is valid in law. As held earlier, the State Government acted in
their statutory capacity to fix the increased price of the sugarcane. There is
no need for the growers to file separate suit to recover the difference of the
price. The recovery proceedings are the appropriate course of action rightly adopted
by the State Government.
next sought to contend that the appellant- factory was notified to be taken
over and denotified for divestment and in the interregnum sales and purchases
have taken place and the consequence thereof requires to be considered. The
appellant had crushed the sugarcane through vacuum pan process in producing
sugar in the relevant period. So it alone is liable to pay the cane price. We
find that the question in this case of sharing the liability by the State
Government does not arises. Therefore, it is unnecessary for us to go into the
question in these appeals.
order dated February
29, 1996 passed by
this Court, the State Government was directed to work out the amount due and
payable to the cane growers in terms of the undertaking given to this Court at
the time of passing the interim order. Pursuant thereto, it appears and it is
not in dispute that the Government has worked out the dues at Rs. 62,90,398.72
and made a demand on March 22, 1996 and in furtherance thereof, the appellant
has deposited the amount on April 3, 1996. In view of the above, if there is
any other demand than what was directed, the respondents are at liberty to
proceed in accordance with law and if there is no demand and the demand has
already been satisfied, then it is needless to mention that the respondents may
not take any further steps in that behalf.
appeals are accordingly dismissed with the above observations. No costs.