IMPORTANT POINT
The statutory power under Section 15 of the U.P. Milk Act, of issuing notification for price fixation could not have been invoked for oblique purpose, to bye pass or commit breach of the directions made by the High Court in the earlier writ petition.

Headnote:Uttar Pradesh Milk Act, 1976-Section 15-Notification issued by Government of Uttar Pradesh fixing price for supply of cream and paneer-Validity of-Supply of cream by respondent to Central Dairy Farm continued on mutually agreed price between them-Notification issued under Section 15 whereby prices, contrary to agreed rate, were fixed-Writ petition-Whether impugned notification can be enforced against the respondent-(No).
       Held : In the present case as the prices of cream and paneer to be supplied by respondent Glindia to the appellant Dairy Farm were fixed under terms mutually settled through negotiations between the parties, the power of price fixation under Section 15 of the Act could not have been invoked by the State Government to nullify the terms and conditions of the agreement on fixation of price reached between the two companies (the appellant and respondent No. 1). (Para 17)
       The power of State Government to fix prices of milk and milk products by issuance of notification under Sec. 15 of the Milk Act is merely an enabling one and it is not obligatory for State Government in all circumstances to fix the prices. In the instant case, the prices of cream and paneer were fixed through mutual negotiations between authorised representatives of the two companies and with the assistance of the authorities of the State. Such binding terms of agreement reached between the two companies could not be frustrated by statutory intervention of the State by issuance of notification for fixation of prices under Section 15 of the Act. As has been pointed out by the State the notification was intended to apply only to respondent Glindia Ltd. as the supplies of cream and paneer were being made to the appellant Central Fairy Farm by the Glindia Ltd. alone. (Para 18)
       The issuance of the impugned notification has rightly been held by the High Court to be an attempt to nullify the directions made by the High Court in its earlier judgment. Direction No. 2 in the operative part required determination of price of cream/paneer by agreement and in the absence of any agreement on the basis of price payable by cooperative societies to purchasers with overhead charges. The dispute about over payment was directed to be resolved by committee to be appointed by the two companies comprising officers of two organisations and the high officials designated under the Milk Act. The statutory power under Section 15 of Milk Act of issuing notification for price fixation could not have been invoked by the State to bye pass or commit breach of the directions made by the High Court in the earlier writ petition. The High Court was fully justified in coming to the conclusion that the issuance of notification under Section 15 of the Act was an exercise done for oblique purpose and to somehow get over the judgment of the High Court in the earlier writ petition. The notification was ineffectual to frustrate the agreements and settlements reached on price fixation through mutual negotiations between the authorised representatives of the two companies and the authorised officers of the State. Para 19)

JUDGMENT

Dharmadhikari J.-These appeals are directed against a common judgment dated 10.2.1992 of the division bench of the High Court of Allahabad whereby Notification No. 4345/XII-DU-VI-13/88 dated 12th January, 1989 issued by the Government of Uttar Pradesh in exercise of powers under Section 15 of the Uttar Pradesh Milk Act 1976 (hereinafter referred to as Milk Act for short) fixing price for supply of cream and paneer, is held to be not enforceable against respondent No. 1 M/s Glindia Ltd., (formerly known as Glaxo Laboratories India Ltd.).

2. The High Court further held that the price of cream and paneer payable to respondent No. 1 for supply by it to the appellant Dairy has to be in accordance with the terms and conditions mutually agreed between the parties at the agreed rate of Rs. 40.40. per Kg. fat to be calculated in accordance with Two Axis Formula evolved in a joint meeting of the representatives of the appellant as purchaser and respondent No. 1 as the supplier of the cream.

3. By the impugned notification, contrary to the terms and conditions agreed between the purchaser and the supplier, rates were fixed below the agreed rate and regardless of the agreed formula for calculation of the prices depending on the fat content in the cream and paneer.

4. For the purpose of these appeals facts in brief leading to initiation of an earlier litigation and institution of the present litigation between the parties are required to be stated:

5. Central Dairy Farm as an industrial unit was purchased by the State of Uttar Pradesh in the year 1948. The dairy was run initially by the Department of Animal Husbandry. In the year 1975, it was made a unit of Uttar Pradesh Pashudhan Udyog Nigam Ltd. which is a State Undertaking registered under the Companies Act. The respondent Glinidia had set up plant for manufacture of infants milk food and obtained a licence under the Industrial Development and Regulation Act. The respondent Glindia had agreed to supply surplus cream available with it to Central Dairy Farm for manufacture of butter and ghee by the latter.

6. The supply of cream by respondent Glindia to Central Dairy Farm continued on the mutually agreed price between them. In the year 1987 certain difficulties arose about pricing of the cream and they were resolved in a meeting on 7.9.1987 between the authorised executives of the appellant Central Dairy Farm, the respondent Glindia and officers of the concerned department of the State. Under the terms mutually settled through negotiations held on 7.9.1987, the price of cream at the agreed rate was to be determined on the basis of Two Axis Formula which was being followed by co-operative societies. The formula is 59% allocated to fat and 41% to SNF with 60 paise per litre for milk to be paid as over-head charges . The two axis formula was revised on 8.2.1988 from 59% to 58% fat and 41% to 42% SNF. When Glindia was asked to adjust payment made on the basis of earlier fixed formula of 59% and 41%, it refused to do so and in fact started converting its cream into ghee for selling it to outside parties.

7. The above alleged action of Glindia led to passing of an order on 5.8.1988 by Additional Milk Commissioner of UP by which directions were issued to Glindia to supply cream to the appellant Dairy as per the then prevailing two axis formula of 52% fat and 48% for SNF allocation on which the price was worked out at Rs. 40.40 per kg. The licensing authority also issued directions to the Deputy Dairy Development Officer not to issue any permit to Glindia for transporting its cream beyond the reserved area. The aforementioned order dated 5.8.1988 passed by the Additional Milk Commissioner was challenged by Glindia in writ petition in the High Court of Allahabad. By judgment dated 14.10.1988 the High Court allowed the writ petition of Glindia holding the action of Additional Milk Commissioner as wholly illegal and beyond his powers under the Milk Act. After quashing the order dated 5.8.19

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2003 Supreme(SC) 1017

IMPORTANT POINTThe statutory power under Section 15 of the U.P. Milk Act, of issuing notification for price fixation could not have been invoked for oblique purpose, to bye pass or commit breach of the directions made by the High Court in the earlier writ petition.

IMPORTANT POINT
The statutory power under Section 15 of the U.P. Milk Act, of issuing notification for price fixation could not have been invoked for oblique purpose, to bye pass or commit breach of the directions made by the High Court in the earlier writ petition.