Rajya Sahakari Sakhar, Karkhana Sangh Ltd. & Ors Vs. State of Maharashtra
& Ors  INSC 245 (27 April 1998)
Ray, M. Srinivasan Srinivasan. J.
appellants are aggrieved by the dismissal of their writ petitions by the High
Court of Bombay in which the appellants had challenged the validity of the Maharashtra
Sugar Factories (Reservation of Areas and Regulation of Crushing &
Sugarcane Supply) (Amendment) October, 1997. This order was passed in exercise
of the powers conferred by Paragraphs (a), (c) and (f) of sub-cl.(1) if Clause
6 and sub-cl. (a) of Clause 9 of the Sugarcane (Control) Order, 1966 read with
Notification of Govt. Of India, Ministry of Food, Agriculture,
Community Development and Corporation (Department of Food). No.GSR. 1127/ESS.
Com. Sugarcane, dated 16th
Sugarcane (Control) Order, 1996 was passed by the Govt. of India under section
3 of the Essential Commodities Act 1955. Clause 6 (a), (c) AND (f) thereof reads
(a) reserve any area where sugarcane is grown (hereinafter in this clause
referred to as reserved area) for a factory having regard to the crushing
capacity of the factory, the availability of sugarcane in the reserved area and
the need for production of sugar, with a view to enabling the factory to
purchase the quantity of sugarcane required by it;
************************ (c) fix, with respect to any specified sugarcane
growers or sugarcane growers generally in reserved area, the quantity or
percentage of sugarcane grown by such grower or growers as the case may be, is
a member of a cooperative society of sugarcane growers operating in the
reserved area, through such society, shall supply to the factory concerned:
************************* (e) ************************** (f) prohibit or
restrict or otherwise regulate the export of sugarcane from any area including
a reserved area) except under and in accordance with a permit issued in this
behalf." Clause 11 of the said Order enables the Central Government to
direct by Notification in official gazette that powers conferred upon it by
that order shall be exercised also by any officer or authority of the Central
Government or a State Government or any officer or authority of the State
Government subject to such restrictions, exceptions, conditions, if any, as may
be specified in the direction. In exercise of the said power under clause 11,
the Central Government issued a Notification dated 16th July 1966 in the following terms:
O T I F I C A T I O N
Delhi, the 16th July, 1966 G.S.R. 1127/Ess. Com./Sugarcane :-
In exercise of the powers conferred by clause (11) of the Sugarcane (control)
Order, 1966 and in supersession of the notification of the Government of India
in the late Ministry of Food and Agriculture (Department of Food) No. G.S.R.
dated the 20th February, 1964 the Central Government hereby directs that powers
conferred on it by clauses 6,7,8 and 9 of the said Order shall be exercisable
also by the State Governments of Andhra Pradesh, Assam, Bihar, Gujrat, Kerala,
Madhya Pradesh, Madras, Maharashtra, Mysore, Orissa, Punjab, Rajasthan, Uttar
Pradesh, and the Lieutenant governor of Pondicherry within their or , as the
case may be, his respective jurisdiction.
K.L. PASRICHA, JT. SECY."
Thus the power conferred on the Central Government by Clause 6 of the Sugar
(Control) order, 1966 was exercisable also by the State Governments mentioned
in the aforesaid Notification which included the State of Maharashtra. In 1984, the State Government
passed the Maharashtra Sugar Factories (Reservation of Areas and Regulation of
Crushing & Sugarcane Supply) Order 1984. The necessity for passing the said
order was set out in detail in the preamble to the order itself. It is
unnecessary to reproduce the same here.
Clause 2(1) of the said order defines a 'reserved area' as the area reserved
for factory as specified in the schedule pertaining to that factory. Clauses 3
and 5 thereof are in the following terms:
Reservation of areas - (1) Having regard to the crushing capacity of sugar
factories and, the yield of sugarcane in the reserved areas, and the need for
production of sugar, the area as specified in each of the schedules is hereby
reserved for the factory mentioned in that schedule, with a view to enabling it
to purchase the quantity of sugarcane required by it.
Subject to the provisions of clauses 4 and 5 of this order, no sugar factory
shall purchase cane or accept supplies of cane from cane growers, except from
the area reserved for that factory.
Regulation of Supply of Sugarcane- (1) A permit Officer may allow a sugar
factory to purchase cane or to accept supplies of cane from cane growers from
areas other than the area reserved for it under clause 3 if he is satisfied
that any of the following circumstances exist namely:- (a) In the event of
production of cane in the area reserved for the factory being not adequate for
enabling it to reach optimum level of crushing;
the event of surplus production of cane in the areas reserved for other
factories which those factories are not able to crush during the crushing
the event of cane grower or cane growers from the area reserved for a
particular factory declining to supply came to the said factory on account of
any of the following reasons, if found justified by the Permit Officer:- (i)
Non-payment or late payment or cane price by the sugar factory; or (ii) Non-fulfilment
of any of the obligations by the sugar factory arising out of agreement between
the cane grower or cane growers and the sugar factory; or (iii) Discrimination
by the sugar factory in harvesting of cane and thereby causing loss to the cane
grower or the cane growers:
that before passing any order under this sub-clause, for any of the reasons,
the Permit Officer shall give the parties concerned a reasonable opportunity of
being heard in person of through the authorised representative."
validity of the said order of 1984 was challenge in the High Court of Bombay. a
Full Bench of the Bombay High Court disposed of the proceedings with certain
directions to the State Government in its judgment dated 23.9.1988.
judgment was the subject-matter of appeals in this Court in Civil Appeals
No.522 of 1989 etc. etc. - Maharashtra Rajya Sahkari Sakkar Karkhana Sangh Ltd.
& Ors. Versus State of Maharashtra & Ors. This court by its judgment
dated April 18, 1995 set aside the directions given by the Full Bench Of the
High Court and upheld the validity of the order of the State Government. The
judgment is reported in 1995 Supp. (3) S.C.C. 475. In Paragraph 2 of the
judgment the directions issued by the Full Bench of the High Court and the
reasons thereof were set out as follows:
The directions issued by the Full Bench are as under:
are therefore of the view, that unless provisions for the following are made in
it, the State Order will not be valid- (i) The sugarcane-growers who are not
members of the factory or factories to which they are required to supply to
which they are required to supply their sugarcane shall be paid for the
sugarcane supplied by them the price sugarcane supplied by them the price
calculated at the market rate prevailing in the locality at the date of the
The market rate may be as agreed between the parties, namely, the
sugarcane-grower and the factory or factories concerned.
there is any dispute over it, the same should be resolved by an independent
authority which may be created under the Order such as the one under clause 12
of the present Order. The authority concerned should decide the dispute
expeditiously after hearing the parties and by a speaking order;
No unauthorised deductions on any account should be made by the factory from
the price to be paid to the sugarcane-grower without his consent. The State
Order should provide for a machinery similar to the above to hear and grant to
the sugarcane-grower, expeditious relief if he has any complaint in that
behalf." The reasons for these directions were twofold, one the non-members
were not bound by the price fixed under bye-laws framed under the Cooperative
Sugar Act and other that there was no machinery in the zoning Order issued by
the State Government to hear the non-members before the price fixed. Before
examining whether these reasons are well founded in law leading to the impugned
directions it is necessary to narrate in brief the necessity which impelled the
central Government to grant protection to sugar industry and consequently to
control the supply and distribution of the sugarcane without sacrificing the
interest of the cane-grower." After referring to Clause 5 of the State
Government's order, this Court said in paragraphs 36, 37 & 38 as follows:
Clauses (5) prescribes the situations in which one sugar factory will be
permitted by the prescribed authority to purchase sugarcane from the zone of
another sugar factory. It does not provide for the caone-grower seeking a
permit for sale of his cane to another sugar factory (than the factory within
whose zone he may be situated) even if any or all the conditions prescribed in
the clause are satisfied. Take a case where a sugar factory indulges in all the
three irrularities mentioned in sub-clause (d) of clause (5), viz., it does not
pay the price of cane at the proper time, it does not adhere to the agreement
it has thereby causing loss to the cane- growers - even then the cane-grower
cannot apply for permit to sell his cane to whomsoever he likes. All that
probably he can do is to complain. But he will get some relief only when there
is another factory (which, of course, has its own zone) which is prepared to
purchase cane from this zone and applies for permit to the Permit Officer to
purchase cane from this zone. If it does not so apply, the grower within the
first zone is helpless. That is not being fair and just to the growers. It is,
therefore, necessary that the state Government may suitably amend the Zoning
Order so as to provide that in a case where any of the three circumstances
mentioned in clauses 5(d) are present it would be open to the cane-growers to
apply to the specified officer for permission to supply his cane outside the
zone. In such an event, it may be open to the officer to designate the factory
to which the grower should sell his cane ensuring that the grower gets a price
which is not less than the price obtained in his zone.
The State Government would be further well advised to get the matter thrashed
out, before the next crushing season commences, by an Expert Committee
comprising of economists and financial experts well versed in price fixation,
particularly in agricultural sector. This exercise has become imperative after
the enforcement of Zoning Order. In fact when Zoning Order was introduced the
State at that time should have got these aspects examined. However, the price
equation since 1984 has undergone tremendous upsurge. the escalation is
manifold. Benefit of higher price of sugar must percolate to growers as well.
the Committee may examine - (a) If the fixation of State Advised Price
Uniformly for the entire State as it is being done in other States, or at least
separately for different zones, as the normal recovery in the zones varies,
would be more feasible;
the additional price worked out in the manner indicated in Schedule II of
Control Order of 1966 is more advantageous and beneficial to the growers. If it
be so it may opt for the same as it would avoid tedious exercise by the
Ministerial Committee and have the benefit of uniformity;
The Committee may further examine whether Rs.600 which has been paid by the
factories to the non-growers under interim order passed by this Court would not
be a reasonable minimum price for 1995- 96 and may furnish the basis for
fixation of price for future years;
may also suggest ways and means for improving yield by the sugar factories and
reducing overhead expenses and eliminating, possible paper loss;
would further be in the interest of the Government to ask the Committee to
examine if the shortcomings pointed out by the Full Bench in other regard can
be rectified and rationalised; and (f) The Committee may examine whether
Bye-law 65 should be applied to non-members or not.
Although the price fixation has not been found to suffer from any infirmity yet
due to passage of time, nearly eight or nine years, since this price fixation
was challenged and with rise of price all around it appears expedient to
dispose of these appeals with following directions to ensure smooth functioning
both for the past and future:
The directions of the Full Bench in para 25 of the judgment shall stand set
The State Government may take appropriate steps to amend clause (5) of the
Zoning Order so as to protect the cane-growers.
The Government may appoint a Committee of Experts to study and examine the
price structure in the light of what has been stated earlier.
Even though the order issued by the State Government determining price for each
factory is upheld but since in consequence of the order passed by the High Court
an interim order was granted by this Court and the factories were directed to
pay Rs.600 to the Cane-growers and they were directed to furnish bank guarantee
for Rs.145 it is directed that the amount paid by the factories shall not be
liable to recovery from the cane-growers. But the bank guarantee furnished by
the appellants or sugar factories shall stand discharged.
is made clear that the direction not to recover Rs.600 from non-growers would
not entitle any member of the cooperative society or the cooperative society
itself to claim that it was liable to be paid Rs.600 for its cane during the
years in dispute."
State Government appointed an Expert Committees as directed by this Court but
the said Committee did not go into the aspect of zoning and confined itself to
the price of sugarcane. There was an agitation by the farmers in the State
according to whom the Government order of 1984 had led to an unsatisfactory
situation warranting an amendment thereof. The State Government appointed a
Committee on 6.1.1996 to take a decision on zoning. The Committee was headed by
the Deputy Chief Minister of the State. Based on the recommendations made by
that Committee, the State Government passed the impugned order amending the
order of 1984 by introducing certain provisos to Clause 3(2) of the order of
1984. The same reads as follows:
Maharashtra Sugar Factories (Reservation of Areas and Regulation of Crushing
and Sugarcane Supply) Order, 1984, - (i) in clause 3, to the condition No. (2),
the following provisos shall be added:
that in case of a Cooperative Sugar Factory, the cane-growers who are not
member of the Cooperative Society, shall be free to supply their cane to any
factory of their choice;
further that a member of a Cooperative sugar factory shall be bound to supply
sugarcane to that Cooperative sugar factory in the ratio of shares held by him
and area under sugarcane as per the bye-laws of the Co-operative sugar factory
and he will be free to supply excess cane, if any, to any factory of his choice
be entering into agreement or contract to that effect:
also that the Non- members cane growers in case of a Cooperative sugar factory
and cane- growers in case of other sugar factories shall be free to their
sugarcane to any factory of their choice by entering into agreement or contract
to that effect. Same provision will apply to excess sugarcane or the member of
Cooperative Sugar factories:
also that if any cane-grower fails to enter into such agreement for supply of
his sugarance, responsibility of disposal of such cane shall be entirely his
own. There shall be no responsibility on any sugar factory, Cooperative or
otherwise or on the State Government, for crushing of any such cane."
is the aforesaid amendment which is attacked by the appellants. The High Court
dismissed the writ petition of the appellants observing that they did not find
that the impugned order was in any way illegal or unreasonable and that the
order would appear to ensure better sugarcane price to the farmers who are not
members of any Cooperative sugar factory.
Before us, Mr. F.S. Nariman, learned senior counsel for the appellants has
advanced three contentions:
first contention is that the State Government being a delegatee from the
Central Government under the Notification dated 16th July 1966 is not empowered to pass an order inconsistent with the
Sugar (Control) Order of 1966 passed by the Central Government. Our attention
is drawn to Section 6 of the Essential Commodities Act and it is contended that
the Sugar (Control) Order of 1966 being one under Section 3 of the said Act
shall have effect notwithstanding anything inconsistent therewith contained in
any enactment other than that Act or any instrument having effect by virtue of
any enactment other than that Act. It is argued that the impugned order is in
exercise of the power conferred under clause 6 (1) of the Sugar (Control)
Order, 1966 read with the Notification dated 16th July 1966 and it cannot
therefore run counter to sub-clause 2 of Clause 6 of the Sugar (Control) Order
of 1966. The said Clause is in the following terms:
sugarcane grower, sugarcane growers cooperative society and factory, to whom or
to which an order made under paragraph (c) of sub-clause (1) applies, shall be
bound to supply or purchase, as the case may be, that quantity of sugarcane
covered by the agreement entered into under the paragraph and any wilful
failure on the part of the sugarcane grower, sugarcane grower's cooperative
society of the factory to do so, shall constitute a breach of the provisions of
that where a default committed by any sugarcane growers' cooperative society is
due to any failure on the part of any sugarcane grower, being a member of such
society, such society shall not be bound to make supplies of sugarcane to the
factory to the extent of such default." According to him the impugned
amendment is contrary to the above clause.
are unable to accept this argument of learned senior counsel. Clause 6(1) only
prescribes the matters with reference to which the Central Government may pass
orders by notifying in the official gazette. By virtue of the Notification
dated 16.7.66, the State Government is also empowered to do so. Sub-cl.(2) of
Clause 6 of the Sugar (Control) Order 1966 is dependent upon an order made
under paragraph, (c) of sub-cl.(1) of Clause 6. Admittedly there is no order
passed by the Central Government under Clause 6(1) (c). Such an order was made
by the State Government in 1984 as referred to by us earlier. The said order of
1984 is amended by the present impugned order of the State Government. It is
not contended before us that the State Government has no power to amend the
order of 1984 or that the power delegated by the Central Government by the
notification dated 16.7.1966 got exhausted with the passing of the order of
1984 and thereafter the State Government had no power to issue another order. hence,
there is no merit in the contention that the State Government has no power to pass
the impugned order.
There is also no merit in the contention that the impugned order is in conflict
with the sugar (Control) Order, 1966 issued under Section 3 of the Essential
Commodities Act. As pointed out already the said order does not by itself make
any provision for the matters set out in Clause 6(1). Hence the first
contention is rejected.
The second contention is that the State Government has exercised its power
arbitrarily and discriminated against the factory owners. According to learned
counsel the various observations made by this Court in its judgment dated April
18, 1995 while upholding the Government Order, 1984 have been completely
ignored by the State Government and that the Expert Committee appointed
pursuant to the direction given by this Court has not made any recommendation
for the present amendment. It is also contended that another Committee
appointed by the State Government had time till 30.8.1997 but the impugned
order was passed even in April without waiting for the report of the second
Committee. We are unable to see any merit in this contention. We have already
referred to the circumstance that the Expert Committee appointed pursuant to
the directions given by this Court in the judgment dated April 18, 1995 had not
considered the aspect of zoning and had confined itself to the price of
sugarcane. The present amendment was made pursuant to the suggestions made by
the Committee appointed by the State Government on 6.1.1996. The reasons for
the present amendment as suggested by the Committee are set out in the
counter-affidavit filed by the State Government as follows:
FOR AMENDMENT OF ZONING ORDER 1984 In the background of the aforesaid facts it
was necessary for the State Government to protect the interest of the members
and non-members cane growers by permitting them to sell their sugarcane outside
the zone of the factory so that they could get the most remunerative prices for
his sugarcane. It was necessary to do so as it was found that :
factories neglect non- members totally in the season when the cane is in excess
than their capacity.
this situation even the members are restricted to the extent of their shares.
large difference in the cane price within the same village in two different
factories goes up to Rs.300 per metric ton (R-7).
amendment is only an extension to the earlier zoning order 1984, clause 5(1)
(d) (para 50) .
failure of the factories to enroll non-members for political reasons and also
on account of the membership granted in favour non- cane growers.
Non-members is deprived of the facilities granted to the members i.e. supply of
seeds, fertilizers, implements, incentives to drip and sprinkler irrigation,
credit facilities and supply of sugar at concessional rate.
alarming drop of sugarcane cultivation from 1995-96 to 1997-98 crushing season
from 560 lakh M. T. to 312 lakh M.T.
expected sugarcane production in India in the year 2000 will be 2000 lakh M.T.
and Maharashtra is expected to grow about 800 lakh M.T.
There is a trend to divert from sugarcane to other crops like soyabeen, cotton
and horticultural crops which is 100% subsidy programme of the State. The area
has gone up under horticultural development by nearly five times (para 15)
nearly 90% contribution is by the State Government to these factories (para 5).
Large scale mismanagement of the sugar factories leading to law cane price and
drop in cane cultivation (Para 13).
Zoning has not yielded desired results during the last 13 years."
view of the above, it is not possible to accept the contention that the State
Government has acted arbitrarily in amending the order of 1984. Nor is there
any discrimination against the factory owners. In fact, this Court has in its judgment
dated April 18, 1995 taken note of the plight of the growers of sugarcane and
directed the State Government to take appropriate steps to amend Clause 5(1) of
the Zoning Order. (see paragraphs 37 & 38 of the judgment already quoted).
The State Government has instead of amending Clause 5 amended Clause 3(2) in
order to improve the position of growers and in particular those who are not
members of cooperative societies.
The third contention is that the amendment is wholly unreasonable and it will put
an end to the cooperative movement. In support of this contention, reliance is
placed on the following observation made by this Court in Paragraph 30 of its
judgment dated April 18,1995:
The dual pricing system, one, for members and other for non- members or the
option to non- members to sell to the factory of their choice may be negative
of the zoning concept and may affect the cooperative movement in the State.
may be right that even before zoning Order was issued the Cooperative movement
was there and the benefits that a member of the society derives may not result
in affecting the system largely but any policy which has the tendency of
shaking the system rudely must be avoided." It is submitted that the
present amendment has the effect of practically annulling the cooperative
are unable to accept this contention. We do not find any justification in the
facts and circumstances of the case for the contention that the cooperative
system would be affected by the present amendment. We find that it is a
balancing act on the part of the State Government to protect the interests of
farmers who are not members of cooperative societies. After the passing of the
1984 order it has been found by the State Government that the provisions
thereof could not enable the Government to achieve the objects with which it
was passed. The counter- affidavit filed by the State Government has set out in
detail the various circumstances which necessitated the State Government to
re-consider the zoning order of 1984.
attention has also been drawn to the counter-affidavit filed by the Govt. of
India in which the stand taken by the State government has been fully
supported. Paragraph 9 of the said counter-affidavit reads as follows:
I further submit that the intention of Zoning or reserving cane areas for each
sugar factory is not to introduce any monopoly to any sugar factory but only to
sub- serve to the interest of the farmers, sugar-factories and consumers at
large both at times of shortage of cane production and in years of surplus.
further submit that the Government of Maharashtra may be allowed to operate the
order dated 19th November, 1997 till the report of the high Powered Committee
set up by the Government of India Under the chairmanship of Sh: B.B. Mahajan to
enquire into various legislations relating to the Sugar Industry in India
including the fixation of Statutory minimum Price of cane is received and a
decision is taken by the Government in the matter."
is also pointed out to us that the impugned amendment is pursuant to a policy
decision of the State Government to protect the interests of the farmers on the
one hand and the cooperative societies on the other. Nothing has been placed on
record to show that the impugned order is vitiated by mala fides. In such
circumstances. It is not possible for this Court to interfere with the order
issued by the State Government. We do not also find anything unreasonable in
the impugned amendment.
the result, we agree with the views expressed by the High Court and dismiss the
The transfer petitions are for transferring proceedings pending on the file of
the High Court in order to be heard along with the above appeal. We do not find
any necessity to withdraw those proceedings to this Court. Now that we have
disposed of the appeal in the above manner, the High Court may dispose of the
proceedings pending before it in accordance with this judgment.
The Civil Appeal and the transfer petitions are dismissed. There will be no
order as to costs.