Mahalakshmi Sugar Mills Co. Ltd.& ANR Vs. Union of India & Ors [2008] INSC 540 (31
March 2008)
S.B. Sinha & V.S. Sirpurkar CIVIL APPEAL NO. 2258 OF 2008 (Arising out of SLP (C) No.481 of 2007) With
Civil Appeal Nos. 2260 AND 2261-2272 of 2008 (Arising out of SLP (C) NOs.14130
and 14967-14978 of 2007) S.B. Sinha, J.
1. Leave granted.
2. What are the factors which are required to be taken into consideration by
the Central Government for determining the price of levy sugar in exercise of
its power under Section 3(3C) of the Essential Commodities Act, 1955 (the Act)
is the question involved herein.
3. Before us, there are various owners of sugar mills who purchased
sugarcane from the farmers.
4. Section 3(2)(f) of the Act empowers the Central Government to fix compulsory
quota of sugar produced by a sugar producer in the manner prescribed by the
Central Government including the price thereof at which the same is to be sold.
It is known as "levy sugar". The rest of the sugar, however, can be
sold by the producers in free market. It is known as "free sugar".
5. The factors which are relevant to be taken into consideration by Central
Government is contained in Section 3(3C) of the Act which includes:
-
The minimum price, if any fixed for
Sugarcane by the Central Government.
-
The manufacturing cost of sugar.
-
The duty or tax, if any, paid or
payable thereon; and (d) Securing a reasonable return on the Capital employed in
the business of manufacturing, and different price may be determined from time
to time for different areas or for different factories or for different kind of
sugar.
6. In these appeals, we are concerned with the determination of price of
sugar for the sugar years 1983-84 and 1984-85.
7. The Central Government, in exercise of its power conferred upon it under
Section 3 of the Act, made an order known as the Sugarcane Control Order.
Clause 5A of the said order reads, thus :
"Clause 5A. Additional price for sugarcane purchased on or after 1st
October 1974:
(1) Where a producer for sugar or his agent purchases sugarcane, from a
sugarcane grower during each sugar year, he shall, in addition to the minimum
sugarcane price fixed under Clause 3, pay to the sugarcane grower an additional
price, if found due, in accordance with the provisions of the second Schedule
annexed to this Order. XXX XXX XXX (4) The additional price determined under sub- clause (2) or
sub-clause (3) as the case may be, shall be paid by the producer of sugar to
the sugarcane grower, at such time and in such manner as the Central Government
or the State Government, as the case may be, from time to time, direct.
(5) No additional price determined under sub- clause (2) or sub-clause (3),
as the case may be, shall become payable by a producer of sugar who pays a
price higher than the minimum sugarcane price fixed under clause (3) to the
sugarcane grower.
Provided that the price so paid shall in no case be less than the total
price comprising the minimum sugarcane price fixed under clause (3) and the
additional price fixed determined under sub-clause (2) or sub- clause (3), as
the case may be.
(6) Where any extra price is paid by the producer of sugar to the sugarcane
grower for the supply sugarcane in addition to the minimum sugarcane price
fixed under clause (3), the extra price so paid shall be adjusted against the
additional sugarcane price determined under sub-clause (2) or sub- clause (3),
as the case may be, and the balance, if any, shall be paid to the sugarcane
grower.
(7)** Subject to the provisions of sub-clause (4), the additional price
shall become payable to a sugarcane grower, if he, in performance of his
agreement with a producer of sugar, supplies not less than 85% o the sugarcane
so agreed:
(* Provided that the Central Government or the State Government as the case
may be, may if it is satisfied that the appellant had sufficient cause for not
preferring the appeal within a further period of thirty days, admit if
presented within a further period of fifteen days.
(**Provided that the additional price shall become payable to a sugar grower
even when he supplies less than 85% of the sugarcane so agreed, if for the same
supply he has not been subjected to any penalty by or under any Central or
State Act or any rules or orders made thereunder for his failure to supply 85%
of sugarcane so agreed."
8. Some of the States in India, however, even prior to coming into force of
the said Parliamentary Act, had enacted Legislative Acts, inter alia, providing
for to regulation and control of production of sugar.
9. We may notice that in the State of Uttar Pradesh, the Government of Uttar
Pradesh enacted Sugar Control Act, 1938. The Legislature of the State of Uttar
Pradesh, furthermore, enacted UP Sugarcane (Regulation of Supply and Purchase)
Act, 1953.
10. We may divide the mode and manner in which the prices for levy sugar
were to be fixed by the Central Government in three different periods.
11. Prior to 1.10.1974, the Central Government, for arriving at the price of
levy sugar, used to mop up the entire excess realization of amount received by
the owners of the sugar mills out of sale of free sugar as no restriction
thereupon was imposed.
12. Levy sugar price also used to be premised on Statutory Minimum Price
(SMP), a factor specified in clause (a) of Section 3(3C) of the Act which is to
be determined in terms of clause (3) of the Sugarcane Control Order, 1966 and
not on the actual cane prices paid by the sugar factories to the cane growers.
13. The Central Government, however, appointed a Committee commonly known as
Bhargava Commission. It gave its recommendations, inter alia, opining that
mopping up of the extra sale realization should be confined to 50%.
14. The Central Government, relying on or on the basis of the
recommendations of the said Commission, introduced clause 5A in the said Order
as a result whereof additional price came to be paid to the growers of
sugarcane (1) over and above the SMP by the sugar producers; (2) equivalent
amount from free market sales realization came to be retained by the sugar
producer.
15. In terms of the said amendment carried out in Sugarcane Control Order in
the year 1974, while determining the levy sugar price, 50% of the mopping up
was permitted provided the liability of sugar producers towards cane growers to
the extent of 50% of excess realization was also taken to be a factor as a part
of cost of production. To put it differently, in the earlier scenario whereas
entire extra sales realization was applied to reduce the price of levy sugar,
upon amendment of the said Order, only 50% of the entire sales realization was
considered to be permissible to reduce the price of levy sugar provided the
liability of excess realization was also considered as a part of cost of
production.
16. Post October 1974, therefore, apart from the levy sugar being based on
the SMP only, the same was based on the actual cane price payable by the sugar
producer. However, according to the sugar mill owners, the Central Government
continued with the exercise of determination of the price of levy sugar on the
basis of 100% mopping up and had not been considering the said changed
scenario.
17. We may also notice that the State of Uttar Pradesh in purported of its
power conferred upon it under Section 16 of the 1953 Act enforced a price to be
paid by the owners of the sugar mill to the producers known as State Advisory
Price (ASP). Indisputably, the SMP as also the ASP for sugarcane varied from
year to year.
18. Questioning the mode of calculation resorted to by the Central
Government in determining the price of levy sugar, particularly, the effect of
clause 5A of the Sugarcane Control Order, as also the price levied by the State
known as ASP, Mahalakshmi Sugar Mills and Hari Nagar Sugar Mills filed writ
applications before the Delhi High Court in the year 1985.
19. Indisputably, similar writ applications for different sugar mills were
filed by different owners of the sugar mills.
20. One of the contentions raised in the said writ applications was that
100% mopping up was illegal and the liability of the sugar producers towards
the cane growers was to be considered before arriving at the price of levy
sugar.
21. One of the matters which came up before this Court is Shri Malaprabha
Cooperative Sugar Factor v. Union of India (Malaprabha-I) since reported in
[(1994) 1 SCC 648] wherein this Court, inter alia, held :
"102. In paragraph 2.15 the details of the scheme were given as
follows:
"SUGARCANE SUPPLIES STABILISATION SCHEME 2.15 The details of the scheme
are as follows:
(1) A statutory minimum price for sugar-cane related to a basic recovery of
8.6 per cent with a premium for every 0.1 per cent increase in recovery on
proportionality basis will be fixed by the Government of India.
(2) The minimum price payable by individual factories will be fixed on the
basis of the recovery of the factory for the normal crushing period of the
previous season.
(3) The statutory minimum price as fixed above shall be paid to all the cane
growers subject to clauses (18) and (19) of this scheme.
(4) The factories shall share their extra sales realisation from sugar with
the cane growers who execute agreements for supply of cane and fulfil
contracts.
(5) The extra sales realisations shall be calculated according to the
following formula:
S=R-L Where S stands for the amount shareable; R stands for the sales
realisations ex-factory excluding excise duty paid or payable to the factory by
the purpose; and L stands for sugar price as calculated on the basis of the
statutory minimum cane price and according to the Tariff Commission schedules
in force at the time. (In periods of control and partial control, L stands for
the final levy price of sugar fixed by Government.) (6) The sales realisations
will be in respect of the sugar produced during the season.
(7) The sales realisations will comprise (i) the actual amount realised up
to and inclusive of September 30; and (ii) the estimated value of the unsold
stocks held at the end of September 30.
In case (ii) the value of the stocks will be calculated at the average rate
of the sales made during the last fortnight of September.
(8) The excess or shortfall in realisation from the actual sale of the
unsold stock of the season after September 30 shall be carried forward to and
adjusted in the extra sales realisations of the following season.
(9) The extra realisation shall be divided equally between the factory and
the cane growers. ..."
104. It is true that Clause 5-A deals with additional price payable to the
sugar-cane grower. However, if the recommendations made by the Bhargava
Commission and the method of computation are taken into consideration, it will
be clear that the producer of sugar will be entitled to retain an amount
equivalent to the amount paid to the cane grower under Clause 5-A. That amount
cannot be taken into consideration for determination of the price of levy
sugar.
This will be evident from paragraphs 2.17, 2.20, 2.21 and 2.39 of Chapter II
of Bhargava Commission Report."
It was furthermore observed :
"108. We are unable to agree with the submissions advanced on behalf of
the Government that Clause 5-A deals only with the amount payable to the cane
grower and that it cannot have any relevance for determination of levy sugar.
If the determination of minimum price of sugar and fixation of the price of
levy sugar under quantity of sugar to be supplied by the producer are inter
connected, then they must be read as a whole and not separately as though each
is distinct. While fixing the price of levy sugar regard is had only to the
minimum cane price as spoken to under Section 3(3-C)( a ). This minimum cane
price is referable to clause (3) of Sugar-cane (Control) Order. The additional
price payable to the cane grower under Clause 5-A will arise after the expiry
of the sugar year. Sugar price will have to be met only from the extra
realisation made by the producer by the sale of sugar in free market which will
naturally be more than the levy price.
109. In view of the above discussion, the impugned notifications except the
one dated November 28, 1974 cannot be upheld. The reason why we leave out the
notification dated November 28, 1974 is that the same came to be issued before
the new pricing policy was introduced. We hereby direct the Union of India to
amend the notifications taking into account the liability of the manufacturers
under Clause 5-A of the Sugar-cane (Control) Order as regards cane price and
refix the price of levy sugar having regard to the factors mentioned in Section
3(3-C) of the Act. The Government will have time to issue the amended
notifications as directed above till December 31, 1993."
22. Indisputably, a review application filed thereagainst was dismissed by
this Court by an order dated 23.2.1994. The Central Government filed an
application praying for clarification as also for extension of time so as to
enable it to re-determine the price of levy sugar which by an order dated
22.2.1995 was dismissed but the time for re-fixation of the price was extended
as prayed for. It appears that during the pendency of the said writ petitions,
in the said appeals before this Court in Malaprabha-I, a transfer application
came to be filed by Modi Industries Ltd. The sugar year involved therein was
1982-83. In that case, the Central Government stated that additional cane price
payable under clause 5A of the Sugarcane Control Order, 1966 had not been taken
into consideration and furthermore no mopping up of excess realization on levy
free sale sugar having been resorted to while fixing the levy price for the
year 1982-83 by a judgment and order dated 30.1.1996 opined that Malaprabha-I
was not applicable. The said decision is since reported in Modi Industries Ltd.
& Anr. v. Union of India & Ors. [1999) 9 SCC 245]. This Court therein
opined :
"In compliance with our order dated 30.1.1996, an additional affidavit
on behalf of the Union of India has been filed by Shri Deepak Khandekar, Deputy
Secretary to the Government of India. In the additional affidavit, it has been
expressly stated that while determining the minimum cane price of levy sugar in
regard has been had only to the minimum cane price as spoken to in Section 3(3-
C)(a) of the Essential
Commodities Act, 1955 and the additional cane price payable under clause
5-A of the Sugar (Control) Order, 1966, has not been taken into account, and
that also there has been no mopping up of excess realization on levy-free sale
sugar while fixing the price of levy sugar for the season 1982-83.
In view of the above further statement made in the additional affidavit
filed on behalf of the Union of India, we are satisfied that this matter is not
covered by the decision of this Court in Shri Malaprabha Coop. Sugar Factory
Ltd. v. Union of India [(1994) 1 SCC 648]."
23. We may notice that similar orders were passed by this Court on 19.8.1998
in the case of Bharat Sugar Mills Ltd. & Anr. v. Union of India &
Ors. and Union of India & Ors. vs. Triveni Engg. Works Ltd. & Ors. by
a judgment and order dated 2.2.1999 which are since reported in (1999) 7 SCC
246 and (1999) 7 SCC 244 respectively. In Bharat Sugar Mills (supra) as also in
Triveni (supra), this Court followed the decision in Modi on the premise that
the sugar year involved therein was also 1982-83.
24. It is, however, of some significance to notice that in the case of
Bharat Sugar Mills, the Central Government in its counter affidavit filed on
16.4.1998, in response to the Court's order in regard to the sugar year 1983-
84 and 1984-85 to re-fix the price, stated :
"It is submitted that in regard to the Levy Sugar (Price Determination
1982-83 Production) Order, the Supreme Court has already upheld the
notification issued under Essential
Commodities Act
in M/s Modi Industries Ltd. v. Union of India & Anr. [TC (C) No.9 of 1990
(Annexure-I)].
In the case of Malaprabha Co-operative Sugar Factory Ltd. v. Union of India
the Supreme Court had in their order dated 22.9.1993 [(1994) 1 SCC 648] and
order dated 28.1.1997 directed the refixation of ex-factory price of levy sugar
for the season 1974-75 to 1979-80. The Supreme Court had in its order dated
28.1.1997 held that their order dated 20.2.1996 in TC (C) No.9 of 1990 was
applicable only in respect of sugar year 1982-83 and it cannot have any bearing
for the years 1975- 76 to 1979-80.
Based on the judgment delivered by the Supreme Court Order dated 28.1.1997
in the case of M/s Malaprabha Co-operative Sugar Factor Ltd.
& Ors. v. Union of India & Ors., the Government is considering the
question of revision of levy sugar prices for the years 1974-75 to 1979-80 and
other subsequent years with the exception of the sugar year 1982-83 in
accordance with the directions contained in the aforesaid judgment."
25. Relying on or on the basis of the said assertion made by the Central
Government, this Court, by an order dated 21.4.1998, directed :
"T.C. (Civil) Nos. 18-20, 23-28, 30, 32-36 and 38- 39/9 are disposed of
in the light of the judgments of this Court in Malaprabha Coo-operative Sugar
SCC 648) read with 1997 (1) SCC 216. The respondents 2 and 3 in their counter
dated 16.4.98 have also stated that for these years they are revising sugar
prices in the light of the above two judgments. It is, therefore, ordered
accordingly.
The prices will be fixed within 12 weeks from today. In respect of the year
1982-83 the respondents shall file an additional affidavit setting out the
basis on which the prices have been fixed for the zones with which we are
concerned in the Transferred Cases. The affidavit will be filed within six
weeks. Rejoinder may be filed within two weeks thereafter. Rest of the TCs. are
adjourned till after the summer vacation."
26. The Central, Government, therefore, in no uncertain terms took the stand
that they would follow Malaprabha-I in the involving relevant sugar years
except for the year 1982-83.
27. The question of implementation of Malaprabha-1 vis-`-vis Modi again came
up for consideration before this Court, as some interlocutory applications were
filed in Shri Malaprabha Co-op. Sugar Factory Ltd. v.
Union of India & Anr. (Malaprabha-II) [(1997) 10 SCC 216]. This Court
noticed the wrong attitude on the part of the Central Government to find
excuses for not complying with the judgment of this Court as the same was not
palatable to them. It therein moreover noticed several notifications issued by
the Central Government from time to time. Upon consideration of several
contentions raised by the Central Government in Malaprabha-I, this Court
pointed out how the Union of India had been making attempt(s) to misconstrue
and misinterpret the earlier judgments. It, upon noticing the contentions of
the Central Government that Section 3(3C) of the Act and clause 5A were totally
independent, in Malaprabha-I, held :
"If the determination of minimum price of sugar and fixation of the
price of levy sugar under quantity of sugar to be supplied by the producer are
interconnected, then they must be read as a whole and not separately as though
each is distinct".
28. The factors which were to be taken into consideration, therefore, were
necessary to depress and reduce the levy sugar price. It was also noticed that
clause 5-A was introduced as a new pricing policy creating a new liability upon
the owners of the sugar mills observing :
"In view of this new liability this Court held that the Government was
bound to take that also into account while fixing the price of levy sugar,
without specifying as to whether the liability became component of Factor A' or
Factor 'B' or both those factors of Section 3(3-C)."
29. Dealing with a new contention which was raised by the Union of India
visa-vis the decision in Modi, it was observed that the direction given in
paragraph 109 of Malaprabha-I was quite clear and did not lend itself to two
interpretations and there was no confusion in relation thereto as thereby this
Court had directed the Central Government to take into account the liability of
the manufacturer under clause 5A of the 1996 order as regards cane price for
re-fixation of the price of levy sugar. It was commented :
"The doubt or confusion, if any, appears to us to be the result of
unwillingness of the Government to give up its views and accept and implement
the decision of this Court."
30. It was furthermore clarified that the issue as to whether the entire or
only 50% of the free sugar price could be mopped up in view of the new price
policy contained in clause 5A for depressing the levy of the price, stating :
"Since by the new pricing policy a benefit was sought to be conferred
on the producer of sugar by making him entitled to retain 50% of the extra
realization, this Court held that the said amount cannot be taken into
consideration for determination of the price of levy sugar. That was entirely a
different aspect. The observation which is made in para 109 and the direction
given therein is with respect to the aspect of sugar producer's liability to
pay additional sugarcane price. Clause 5-A being interconnected with Section
3(3-C), this new liability would certainly get projected into Factors 'A' and
'B' of Section 3(3-C). As earlier pointed out mopping up of extra realization
is an element of Factor 'D' of Section 3(3-C). Thus, the contentions raised on
behalf of the respondents even otherwise also do not deserve to be
accepted."
31. Distinguishing Modi (supra), the law was stated in the following terms :
"Even if the Government has omitted to take into consideration one
unfavourable element, namely, mopping up of excess realization it cannot
justify its omission to take into consideration another relevant element which
is favourable to the producer of sugar."
32. It was, therefore, emphasized that whereas an unfavourable element,
namely, mopping up of excess realization is to be taken into consideration, the
favourable element, namely, liability created towards cane growers for the
purpose of determination of the price could not have been ignored.
33. Two different Benches of the Delhi High Court, however, reacted
differently to the aforementioned decisions of this Court by reason of the
judgments which are impugned before us in the case of Hari Nagar Sugar Mills
disposed of on 16.3.2005 and in the case of Mahalakshmi Sugar Company disposed
of on 9.11.2006.
34. Before noticing the respective contentions of the learned counsel
appearing for the parties herein, we may notice two other decisions of this
Court.
35. In The Godavari Sugar Mills Ltd. v. Union of India & Anr. [JT 2001
(10) SC 527] wherein the relevant sugar year was 1985-86, a question arose as
to whether after a long lapse of time, the petitioner therein should be
permitted to raise new contentions through a writ petition. This Court refused
to exercise its discretionary jurisdiction in permitting the petitioner therein
to do so holding that the same will have great financial impact on the Central Government.
The Bench chose to follow Modi (supra).
36. A contempt petition was also filed by Malaprabha-I for non-
implementation of the decisions of this Court wherein a Bench of this Court
opined that no contempt has been committed by the Central Government.
The said decision is reported in Malaprabha Coop. Sugar Factory Ltd. v.
Union of India & Anr. (Malaprabha-3) [(2002) 9 SCC 716]. It was held :
"This Court in the aforesaid two decisions has said that the retention
of 50 per cent is a factor which can be taken into consideration in determining
element (d) in Section 3(3C) of the Essential Commodities Act.
The working statement given before us shows that this has been done, not to the
extent as desired by the petitioners, but the result of this is that the levy
price fixed at Rs.163.780 in respect of West U.P. has gone up to Rs.172.430.
In our opinion, the said fixation is in accordance with law and the
directions given by this Court have been complied with. Neither a case for
contempt has been made out nor is there any justification, in our opinion, for
giving any direction to the Government to refix the levy price under Section
3(3-C) of the Essential
Commodities Act."
37. To complete the narration of facts, we may also notice that validity of
the orders passed by the State of U.P. in purported exercise of its power under
Section 16 of the 1953 Act was questioned before a Division Bench of the
Allahabad High Court in West UP Sugar Mills Association & Ors. v.
State of U.P. & Ors. [1997 (1) UPLBEC 541]. A Division Bench of the said
Court noticed that the purported policy of the State of Uttar Pradesh which had
been prevailing from 1973 was ultra vires, the legislative field being covered
under the Essential
Commodities Act. The UP Cooperative Cane Union Federations came up before
this Court questioning the correctness of the said judgment. The matter was
referred to a Constitution Bench. The majority reversed the decision of the
Allahabad High Court holding that the State in exercise of its power of
regulation and control of sugar industries could fix a higher price for the
sugarcane, stating :
"These cases clearly lay down that under the 1966 Order, the Central
Government only fixes the minimum price and it is always open to the State
Government to fix a higher price. Under the enactments made by the State
Legislatures, areas are reserved for the sugar factories and the cane- growers
therein are compelled to supply sugarcane to them and therefore, the State
Government has incidental power to fix the price of sugarcane which will also
be the statutory price. They further lay down that the Cane Commissioner can
direct the cane-growers and the sugar factories to enter into agreements for
purchase of sugarcane at a price fixed by the State Government and such
agreements cannot be branded as having been obtained by force or
compulsion." It was furthermore held :
"The second reasoning given by the High Court is that even if the State
Government had the power to fix the minimum cane price under Section 16 of the
1953 Act, this power came to an end in view of Article 254(1) of the
Constitution on the enactment of the EC Act and the promulgation of the
Sugarcane (Control) Order, 1955 (later replaced by the 1966 Order), which now
gives exclusive power to the Central Government to fix the minimum price. As
discussed earlier, we are not in agreement with the aforesaid reasoning as the
question of repugnancy does not arise. The High Court has also held that the
Central Government, while fixing the price of sugar under Section 3(3- C) of
the EC Act, takes into consideration the minimum price of sugarcane fixed under
the 1966 Order and if the sugar mills are compelled to pay a higher price than
that fixed by the Central Government, it will disturb the price of the levy
sugar and such an eventuality could not have been contemplated by the
legislature. Over a period of time, the quota of levy sugar has gone down from
40 per cent to 10 per cent of the total production of sugar and the sugar mills
are now free to sell 90 per cent of their production in open market. Under
Section 3(3-C) of the EC Act, the Central Government has to determine the price
of the levy sugar having regard to several factors enumerated in the
sub-section and the minimum price fixed under the 1966 Order is only one of the
factors.
The manufacturing cost of sugar and securing of reasonable return on the
capital employed in the business of manufacturing sugar are also relevant
factors under clause (b) and (d) of Section 3(3-C) of the EC Act and,
therefore, the fixation of higher price for sugarcane by the State Government
by itself cannot have any major or substantial impact on the fixation of the
price of the levy sugar by the Central Government."
38. We have noticed hereinbefore the divergent views taken by two Division
Benches of the Delhi High Court.
39. In the case of Mahalakshmi Sugar, the Delhi High Court framed three
issues :
"(a) Whether, in view of the judgments of the Hon'ble Supreme Court in
Malaprabha-I and Malaprabha-II the impugned order of the Central Government
fixing the price of levy sugar for 1984-1985 is liable to be struck down
inasmuch as it admittedly does not account for the additional price payable by
the sugar manufacturer under Clause 5A of the Control Order? (b) Is the Central
Government, while fixing the price of levy sugar under Section 3(3C) EC Act,
liable to account for the SAP fixed by the State of UP and mandatorily required
to be paid by the sugar manufacturer to the sugarcane grower? (c) Is the State
of UP liable to bear the liability arising out of the difference between the
SAP and the combination of the SMP and the additional price?"
40. In regard to the first issue, it was held that the decision in Modi
(supra) covers the field in regard to the application of the factor of payment
of additional price to the cane growers. In regard to the factor of State
Advice Price (SAP), the High Court upon noticing paragraph 44 of the judgment
in Cane Growers Federation (supra) held that the same was not a relevant factor
for the purpose of determination of the price of levy sugar. In regard to the
issue (c), it was held that the State of Uttar Pradesh is not liable to pay the
difference of price to the writ petitioners.
41. Mr. Nageshwar Rao, learned senior counsel appearing on behalf of the
appellant in CA @ SLP (C) No.481/07 (Mahalakshmi) urged :
-
Determination of price of levy sugar being a statutory legislative
function, the Central Government could not have ignored any of the factors laid
down therefor.
-
As in Malaprabha-I, levy of additional price in terms of Clause 5A of the
order was held to be a relevant factor within the meaning of clause (b) of
Section 3(3C) of the Act, the Central Government could not have ignored the
same only on a specious plea that the mopping up of the excess amount realized
by the sugar mill owners have come down from 100% to 50%.
-
In view of the clear and unambiguous directions of this Court in Malaprabha-I, as clarified in Malaprabha-II, the Central Government was
obligated to take into consideration the fact that the liabilities of the owner
towards the cane grower in terms of Clause 5A of the Order as also the State
Advice Price would follow in purview of clauses (b) and (d) of Section 3(3C) of
the Act.
-
A Constitution Bench of this Court
having opined that imposition of SAP being statutory in nature and as the same
enhanced the liability of the sugar mill owners to be a relevant factor for
determination of the price of levy sugar both under clauses (b) and (d) thereof,
the High Court committed a serious error in passing the impugned judgment.
-
The High Court misread and
misinterpreted the observations of this Court in paragraph 44 of the UP Cane
Growers' case wherein it had categorically been held that SAP for the purpose of
determination of the price of levy sugar would come within the purview of clause
(b) of Section 3(3C) of the Act.
-
Price of sugarcane for being 70% component of the price of sugar, the total
liability of the owner in relation thereto was mandatorily required to be
considered by the Central Government.
-
In view of the stand taken by the Central Government itself in the case
of Bharat Sugar Mills for the sugar years 1983-84 and 1984-85 which was not
confined to the case of the petitioners therein, the Central Government could
not have taken a different stand in the instant cases.
42. Mr. Mohan Parasaran, learned Additional Solicitor General appearing on
behalf of the Union of India, on the other hand, urged :
-
In view of the decisions of this Court in Malaprabha-I, the Central
Government sought to rectify the mistake by introducing Clause 5A in the Sugar
Control Order in terms whereof the additional price required to be paid to the
cane growers was to be adjusted with the 50% mopping up from the excess amount
realized by the owners of the sugar mills.
-
This Court in Malaprabha-3 having found the action on the part of the
Central Government to be in terms of the decision of this Court in Malaprabha-I,
no case has been made out for interference with the impugned judgment.
-
There being no difference in determination of the price for levy sugar
for the years 1982-83 and 1985-86 vis-`-vis sugar year 1983-84 and 1984-85,
this Court should affirm the decision of the Delhi High Court dismissing the
writ petition of the owners, particularly, when a similar view has been taken
in Bharat Sugar Mills (supra) and Triveni (supra).
-
In any event, even on equitable
considerations, this Court should not interfere with the decision of the High
Court after such a long time.
-
Power of judicial review in the case
of the price fixation being limited, this Court should not interfere in the
matter particularly having regard to the fact that fixation of price is a
legislative function.
43. The Parliament enacted the Essential
Commodities Act, 1955 to provide in the interest of general public, the
control of production, supply and distribution of, and trade and commerce, in
certain commodities.
Section 3(3C) of the Act reads as under :
"3.(3C) Where any producer is required by an order made with reference
to clause (f) of sub section (2) to sell any kind of sugar (whether to the
Central Government or a State Government or to an officer or agent of such
Government or to any other person or class of persons) and either no
notification in respect of such sugar has been issued under sub-section (3A) or
any such notification, having been issued, has ceased to remain in force by
efflux of time, then, notwithstanding anything contained in sub-section (3),
there shall be paid to that producer an amount therefor which shall be
calculated with reference to such price of sugar as the Central Government may,
by order, determine, having regard to-
-
the minimum price, if any, fixed for
sugarcane by Central Government under this section ;
-
the manufacturing cost of sugar;
-
the duty or tax, if any, paid or
payable thereon; and
-
the securing of a reasonable return
on the capital employed in the business of manufacturing sugar and different
prices may be determined from time to time for different areas or for different
factories or for different kinds of sugar.
Explanation.-For the purposes of this sub-section, "producer"
means a person carrying on the business of manufacturing sugar."
44. A direction by the Central Government to the owners of the sugar mills
that a part of their products would be sold at a price determined by it was
within its realm. Such a quota could be fixed by the Central Govrnment in
exercise of its power under Section 3(2)(f) of the Act.
45. Indisputably, determination of price in terms of the provisions of the
Act is a legislative function. The Superior Courts ordinarily would not interfere
therewith. But when such a function is carried out in contravention of the
statutory requirements, the courts are not powerless. In a case of this nature,
it becomes the duty of the Court to interpret its earlier judgments and refer
the one which is applicable.
46. Determination of a price is required to be carried out keeping in view
certain factors specified therein. The term "having regard to" plays
an important role in the matter of construction of the relevant provisions of
the Act. If a price is determined without applying the principles underlying
the factors enunciated in Section 3(3C) of the Act, the superior courts can
issue requisite direction.
47. When the validity a notification issued by the Central Government in
exercise of its power under a statute is questioned, even if the provision is
directory in nature, substantial compliance thereof must be shown to have been
made. The statutory authority must apply its mind.
48. The directions issued in the decisions of this Court must be demonstrated
to have been complied with. {See Shri Sita Ram Sugar Company Ltd. v. Union of
India [(1990) 3 SCC 223]}. [See also Commissioner of Income-Tax, West Bengal,
Calcutta v. Gungadhar Banerjee & Co. (P) Ltd. [(1965) 3 SCR 439, Page 444,
Placitum E to Page 445, Placitum C]; The Panipat Co-operative Sugar Mills v.
The Union of India [(1973) 1 SCC 129, Para 30]; The State of Karnataka &
Anr. v. Shri Ranganatha Reddy & Anr. [(1977) 4 SCC 471], Paras 22 to 24;
State of U.P.
& Ors. v. Renusagar Power Co. & Ors. [(1988) 4 SCC 59, Paras 80-84];
Shri Sitaram Sugar Company Ltd. & Anr. v. Union of India & Ors. [(1990)
3 SCC 223, Paras 28-30]; Kuldip Chand & Anr. v. Advocate-General to
Government of HP & Ors. [(1990) 4 SCC 356, Para 15]; Delhi Farming &
Construction (P) Ltd. v. Commissioner of Income Tax, Delhi [(2003) 5 SCC 36,
Para 26].
49. Section 3(3C) of the Act specifies four factors. The Statutory Protected
Price, as specified by the Order, would be a factor which would be covered by
clause (a). The Central Government, however, cannot ignore the other factors.
50. How the statutory direction to pay additional price to the cane growers,
as envisaged under clause 5A of the Order or the State Advisory Price as
mandated by the States in exercise of their regulatory power ,would be applied
in determining the price of levy sugar was the subject matter of various
decisions of this Court.
51. In Malaprabha-I, this Court noticed the statutory change effected by
reason of insertion of Clause 5A in the Order w.e.f. 1.10.1974. The question
raised before this Court was that in price fixation, the Central Government had
not taken into consideration the relevant criteria laid down under Section
3(3C) of the Act while issuing notifications in regard to the fixation of price
of levy sugar. Noticing the decision of this Court in Indian Express Newspapers
(Bombay) Private Ltd. and Ors. v. Union of India and Ors.
[(1985) 1 SCC 641], it was held that subordinate legislation can be
questioned on any ground on which the primary legislation could be questioned.
The premise of judicial review may be glanced from the following observations
made by this Court in Bombay Dyeing &
Manufacturing Co. Ltd. v. Bombay Environmental Action Group [(2006) 3 SCC
434] :
"80. A policy decision, as is well known, should not be lightly
interfered with but it is difficult to accept the submissions made on behalf of
the learned counsel appearing on behalf of the Appellants that the courts
cannot exercise their power of judicial review at all. By reason of any legislation
whether enacted by the legislature or by way of subordinate legislation, the
State gives effect to its legislative policy. Such legislation, however, must
not be ultra vires the Constitution.
A subordinate legislation apart from being intra vires the Constitution,
should not also be ultra vires the parent Act under which it has been made.
A subordinate legislation, it is trite, must be reasonable and in consonance
with the legislative policy as also give effect to the purport and object of
the Act and in good faith."
52. Judicial review of subordinate legislation has also been dilated upon by
the Court recently in Vasu Dev Singh v. Union of India [2006 (11) SCALE 108,
Paras 12 to 23]. {See also Life Insurance Corporation of India & Ors. v.
Retired L.I.C. Officers Association & Ors. [2008 (2) SCALE 484]}.
53. From these decisions, it may be deduced that validity of subordinate
legislation may be questioned on the ground that :
-
it is ultra vires the Constitution;
-
it is ultra vires the parent Act;
-
it is contrary to the statutory
provisions other than those contained in the parent Act;
-
law-making power has been exercised
in bad faith;
-
It is not reasonable; and f) it goes
against legislative policy, and does not fulfill the object and purpose of the
enabling Act.
54. In Malaprabha-I, Statutory Minimum Price statutorily required to be paid
by the sugar producers to the sugarcane grower was held to be an element so far
as factor (b) of Section 3(3C) of the Act is concerned. This Court took notice
of the recommendations of Bhargava Commission. This Court, despite its limited
power of judicial review, held that the Central Government cannot ignore any of
the factors specified in Section 3(3C) of the Act for the purpose of fixation
of price for levy sugar. What was relevant was the actual cane price paid and
excess realization from free market sales therefor.
55. In Sitaram Sugar (supra) payment of price of sugarcane to the growers
has been found to constitute 70% of the total price. Therefore, it indisputably
had a great role to play for determining the price of levy sugar.
Only with a view to determine the price, it was also necessary to take into
consideration the manufacturing cost and reasonable return on the capital
employed. The Essential
Commodities Act does not contemplate that manufacturers of sugar must
continue their activities although the units were running at a loss. Purported
object for which Clause 5A was introduced was to see that the sugar industry
became entitled to excess realization of free sugar which would give them a
reasonable margin for meeting their requirements including modernization and
expansion of the Plant.
56. Sub-clause (iv) of Clause 5A of the Order mandates that the additional
price determination under sub-clause (ii) shall be paid by the producer of
sugar to the sugarcane grower. It is, therefore, mandatory in character and
added to the price of the sugarcane. It was clearly held that 50% of the
mopping up amount could not be taken into consideration for determination of
the price of levy sugar. Admittedly, mopping up of 100% was held to be illegal.
57. It was in the aforementioned premise, this Court followed the decision
of Justice E.S. Venkataramiah in Writ Petition No.432 filed in the High Court
of Karnataka (quoted in Malaprabha-I (1994) 1 SCC 648), wherein it was observed
that if the additional price under Clause 5A is allowed to be done, the
producer of sugar would be compelled to carry on production of sugar without
having an idea of the price that is likely to be determined by the Central
Government under Section 3(3C). A producer must draw an object, having regard
to his assets and liabilities, income and expenditure, whether he would be able
to have a reasonable amount of profit or not. It was in that situation, the
Central Government was directed to refix the price of levy sugar. The
jurisdiction of this Court to interfere in the matter had clearly been spelt
out.
58. Modi, Bharat Mills and Triveni dealt with sugar year 1982-83 only. It
proceeded on the basis that in that year, the mopping up having not been done
and levy in terms of Clause 5A had not been applied, the factors laid down
under Section 3(3C) stood complied with. It is for the aforementioned limited
extent, Malaprabha-I was distinguished. No reason has been assigned in support
of its decision. Rival contentions had not been noticed.
The effect of payment of additional price as also SAP effect in determining
the price did not fall for consideration therein. Godavari (supra), as noticed
hereinbefore, was decided on the same line, particularly, having regard to the
fact that the prayers made by the appellant therein are sought to be amended
which was not allowed.
59. It is in the aforementioned situation, Malaprabha-II assumes
significance. It not only explained the ratio laid down in Malaprabha-I but
also took into consideration Modi Industries (supra) as also fresh arguments
advanced on behalf of the Central Government. All contentions of the Central
Government were specifically rejected.
60. The decision in Malaprabha-II that while taking into consideration the
unfavourable factor, the Central Government cannot refuse to consider the
factor which is favourable to the mill owner assumes significance. We say so
for two reasons (1) it is possible that while confining mopping up to the
extent of 50%, the fact of additional price paid in terms of Clause 5A of the
Order would be neutralized or adjusted but the same would not mean that the
exercise shall not be carried into effect; and (2) the effect of payment of an
extra amount in terms of State Advisory Price cannot be refused to be taken
into consideration.
61. We are not unmindful of the fact that the learned counsel for the appellant
in Mahalakshmi before the High Court confined its case only to SAP but then in
Hari Nagar Sugar Mills, the Delhi High Court accepted the contentions which
have been raised before us.
62. When the legislative policy is reflected in a statutory provision, the
Court, while being called upon to determine as to whether the same has been
complied with or not, must apply the rule of purposive construction. It is
idle, in a case of this nature, to contend that as the element of additional
price paid under Clause 5A of the Order and SAP had not been specifically
provided for in Section 3(3C), they should be kept out of consideration for the
purpose of determination of the price of levy sugar. If the actual price
payable to the cane growers is absolutely relevant for determining the price of
levy sugar, we have no doubt in our mind that consideration of the said
elements would come either under clause (b) or clause (d) of Section 3(3C) of
the Act. It was so held in Malaprabha-I. It is interesting to note that the Constitution
Bench of this Court in UP Coop. Cane Unions Federations rejected a contention
raised by the parties that in the event the State is held to have the
legislative competence to impose the same, it will have an adverse effect on
the price of levy sugar required to be determined under Section 3(3C) of the
Act as noticed supra.
63. Clauses (b) and (d) of Section 3(3C) were, therefore, clearly held to be
attracted by the Constitution Bench also.
64. The importance of applying the Rule of purposive construction has
recently been noticed by this Court in New India Assurance Co. Ltd. v. Nusli Neville Wadia [2007 (14) SCALE 556] in the following liness :
"48. Section 5 of the Act, on a plain reading, would place the entire
onus upon a noticee. It, in no uncertain terms, states that once a notice under
Section 4 is issued by the Estate Officer on formation of his opinion as
envisaged therein Page 0183 it is for the noticee not only to show cause in
respect thereof but also adduce evidence and make oral submissions in support
of his case. Literal meaning in a situation of this nature would lead to a
conclusion that the landlord is not required to adduce any evidence at all nor
it is required even to make any oral submissions. Such a literal construction
would lead to an anomalous situation because the landlord may not be heard at
all. It may not even be permitted to adduce any evidence in rebuttal to the one
adduced by the noticee nor it would be permitted to advance any argument. Is
this contemplated in law? The answer must be rendered in the negative. When a
landlord files an application, it in a given situation must be able to lead
evidence either at the first instance or after the evidence is led by the
noticee to establish its case and/ or in rebuttal to the evidence led by the
noticee.
49. The literal interpretation of the statute, if resorted to, would also
lead to the situation that it would not be necessary for the landlords in any
situation to plead in regard to its need for the public premises. It could just
terminate the tenancy without specifying any cause for eviction.
50. Except in the first category of cases, as has been noticed by us
hereinbefore, Sections 4 and 5 of the Act, in our opinion, may have to be
construed differently in view of the decisions rendered by this Court. If the
landlord being a State within the meaning of Article 12 of the Constitution of
India is required to prove fairness and reasonableness on its part in
initiating a proceeding, it is for it to show how its prayer meets the
constitutional requirements of Article 14 of the Constitution of India. For
proper interpretation not only the basic principles of natural justice have to
be borne in mind, but also principles of constitutionalism involved therein. With a view to read the provisions of the Act in a proper and effective
manner, we are of the opinion that literal interpretation, if given, may give
rise to an anomaly or absurdity which must be avoided. So as to enable a superior court to interpret a statute in a reasonable manner,
the court must place itself in the chair of a reasonable legislator/ author. So
done, the rules of purposive construction have to be resorted to which would
require the construction of the Act in such a manner so as to see that the
object of the Act fulfilled; which in turn would lead the beneficiary under the
statutory scheme to fulfill its constitutional obligations as held by the court
inter alia in Ashoka Marketing Ltd. (supra).
51. Barak in his exhaustive work on 'Purposive Construction' explains
various meanings attributed to the term 'purpose'. It would be in the fitness
of discussion to refer to Purposive Construction in Barak's words:
'Hart and Sachs also appear to treat 'purpose' as a subjective concept. I
say 'appear' because, although Hart and Sachs claim that the interpreter should
imagine himself or herself in the legislator's shoes, they introduce two
elements of objectivity: First, the interpreter should assume that the
legislature is composed of reasonable people seeking to achieve reasonable
goals in a reasonable manner; and second, the interpreter should accept the
non-rebuttable presumption that members Page 0184 of the legislative body
sought to fulfill their constitutional duties in good faith. This formulation
allows the interpreter to inquire not into the subjective intent of the author,
but rather the intent the author would have had, had he or she acted
reasonably.' (Aharon Barak, Purposive Interpretation in Law (2007) at pg. 87)
52. In Bharat Petroleum Corporation Ltd. v. Maddula Ratnavalli and Ors. [(2007) 6 SCC 81], this Court held:
'The Parliament moreover is presumed to have enacted a reasonable statute
(see Breyer, Stephen (2005): Active Liberty:
Interpreting Our Democratic Constitution, Knopf (Chapter on Statutory
Interpretation - pg. 99 for Reasonable Legislator Presumption).'
53. The provisions of the Act and the Rules in this case, are, thus required
to be construed in the light of the action of the State as envisaged under
Article 14 of the Constitution of India. With a view to give effect thereto,
the doctrine of purposive construction may have to be taken recourse to.
[See Oriental Insurance Co. Ltd. v. Brij Mohan and Ors. [2007 (7) SCALE 753]
.
65. We are of the opinion that the same principle should be applied herein.
66. That is how the Central Government itself understood the decision of
this Court in Malaprabha-I. It explicitly said so in the counter affidavit
filed in Bharat Sugar Mills. Indisputably, for the purpose of determination of
the price of levy sugar, it called for the relevant materials from each of the
owner of the sugar mill. It is, therefore, too late in the day for the Central
Government to contend contra.
67. Rules of executive construction in a situation of this nature may also
be applied where a representation is made by the maker of legislation at the
time of introduction of the Bill or construction thereupon is put by the
executive upon its coming into force, the same carries a great weight.
68. In this regard, we may refer to the decision of the House of Lords in
the matter of R.V. National Asylum Support Service [(2002) 1 W.L.R.2956] and
its interpretation of the decision in Pepper v. Hart [(1993) A.C. 593]. on the
question of 'executive estoppel'. In the former decision, Lord Steyn stated:- "If
exceptionally there is found in the Explanatory Notes a clear assurance by the
executive to Parliament about the meaning of a clause, or the circumstances in
which a power will or will not be used, that assurance may in principle be
admitted against the executive in proceedings in which the executive places a
contrary contention before a court."
69. A similar interpretation was rendered by Lord Hope of Craighead in
Wilson v. First County Trust Ltd., [2004] 1 A.C. 816, wherein it was stated:-
"As I understand it [Pepper v. Hart], it recognized a limited exception to
the general rule that resort to 'Hansard' was inadmissible. Its purpose is to
prevent the Executive seeking to place a meaning on words used in legislation
which is different from that which ministers attributed to whose words when
promoting the legislation in Parliament"
70. See for a detailed analysis of the rule of executive estoppel in a
writing of Francis Bennion entitled "Executive Estoppel: Pepper v. Hart
revisited", published in Public Law, Spring 2007 issue, pg. 1.
71. Reliance placed by the learned Additional Solicitor General on
Malaprabha-III is not apposite. This Court therein found the action of the
Central Government to be not an act of contempt presumably because the
directions were held to have been substantially complied with. We are not
exercising any contempt jurisdiction. Contempt is a matter between the Court
and the contemnor. We are herein called upon to determine as to which view of
Delhi High Court in Hari Nagar or Mahalakshmi is correct.
We cannot refuse to lay down the law having been called upon to do so. We
must lay down a law for the future. We, therefore, while directing the Central
Government to refix the price of levy sugar, would keep this direction confined
only to the parties before us including the interveners.
The reason therefor is that the other mill owners were not aggrieved
thereby.
The parties before us are fighting their grievance for more than 22 years.
They should not be allowed to go empty handed.
72. We are, therefore, of the opinion that Mahalakshmi has wrongly been
decided whereas Hari Nagar has correctly been decided.
73. Appeals arising out of SLP (C) Nos.481/2007 and 14130/2007 filed by
Mahalakshmi Sugar Mills Co. Ltd. and Govind Nagar Sugar Ltd. respectively are consequently allowed and Appeals arising out SLP (C)
Nos.14967-14978 of 2007 filed by Union of India & Ors. are dismissed. No
costs.
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