2004 Supreme(SC) 628

2004(5) Supreme 246
Supreme Court of India
(From Allahabad High Court)
S. Rajendra Babu, CJI, K.G. Balakrishnan, P. Venkatarama Reddi, B.N. Srikrishna & G.P. Mathur, JJ.
U.P. Co-operative Cane Unions Federations -Appellant
versus
West U.P. Sugar Mills Association and Ors. -Respondents
Civil Appeal No. 460 of 1997
With
C.A. Nos. 461/1997, 4685/1997, 1727/1999, 4602/1999, 6065/2001, 3023 and 3022/2004, @ SLP (C) No. 16851/2001, SLP (C) Nos. 1363/2002, 948/2003, C.A. Nos. 8117-8122/2001, T.C. (C) Nos. 21-22/2003, I.A. No. 3 in C.A. No. 460 of 1997
All Decided on 5-5-2004
Counsel for the Parties :
For the Appearing Parties : Rakesh Dwivedi, Y.V. Giri, Shanti Bhushan, Jayant Bhushan, K.K. Venugopal, P. Chidambaram, A.T.M. Ranga Ramanujam, Mrs. K. Amareshwari, Sr. Advocates, Prashant Kumar, Joseph Pookkatt, Manu Beri, Abhishek Chaudhary, Ms. Pooja Dham, Praveen Kumar, Prateek Kumar, Achintya Dwevedi, Sudhir Kumar Gupta, Rohit Alex, P.H. Parekh, Ms. Seema Bengani, Vikas Pahwa, E.R. Kumar, S. Guru Krishna Kumar, Mrs. Srikala, C.K.M. Singh, S.R. Setia, Ajay Bhalla, Ms. Abha R. Sharma, Pramod Swarup, Ms. Pareena Swarup, Praveen Swarup, Saket Singh, Ms. Niranjana Singh, Ms. Vimla Sinha, B.B. Singh, Ms. Pinky Anand, Ms. Geeta Luthra, D.N. Goburdhun, B.S. Chahar, Mrs. Jyoti Chahar, Vinay Garg, Ms. Rani Jethmalani, Mrs. Gouri Karnna Das, Ms. Anu Gupta, Ms. Debjani Das Par Kayastha, Rakesh Uttamchandra Upadhyay, Jatinder K. Sethi, Achintya Dwivedi, Punit Dutt Tyagi, Pradeep Misra, S.S. Shinde, Mukesh K. Giri, Manoj Swarup, Ms. Lalita Kohli, Abubhav Kumar, K. Subbarao, T.V. Ratnam, K. Ram Kumar, B. Sridhar, P.S. Narasimha, P. Sridhar, Ananga Bhattacharya, G. Seshagiri, Nikhil Nayyar, Satinder S. Gulati, Ms. Kavita Wadia, K.K. Mohan, Ms. Geetanjali Mohan, Ms. Anusuya, Ms. Madhu Moolchandani, V.M. Singh-in-person, Mrs. Niranjana Singh, Ms. Naresh Bakshi, R.S. Suri, Pravir Chaudhary, Advocates.­

Important point
The State Governme nt can fix the State Advised Price for purchase of sugarcane by an occupier of a sugar factory over and above the minimum price fixed by the Central Government.

Headnote:Esssential Commodities Act, 1956 -Sections 2(a), 2(b), 3-Sugarcane Control Order, 1966-Clauses 2(g), (i), 3(1), (2), (3)-U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953-Sections 2(a), 2(n), 15 and 16-U.P. (Regulation of Supply and Purchase) Rules 1954-Rules 21, 38-A, 94(b), 96, 100-U.P. Sugarcane (Regulation of Supply and Purchase) Order 1954-Clauses 3-A, 3(2), 3(3), 4(1), 5(2) and (3)-Price to sugarcane grower-Competence of State Government to fix State Advised Price for purchase of sugarcane by an occupier of a sugar factory over and above the minimum price fixed by the Central Government-Challenged-Validity of procedure adopted for payment of aforesaid price to a sugarcane grower challenged-Central Government by an order dated 11-3-1996 fixed the statutory premium price of sugarcane payable by sugar factories for 1996-97 sugar season at Rs. 45.90 per quintal-Additional price under Clause 5-A of Sugarcane (Control) Order came to about Rs. 7 per quintal-Sugar Mills were liable to pay Rs. 57.33 per quintal-State Government of Uttar Pradesh fixed State Advised Price at Rs. 72 per quintal for ordinary quality and Rs. 75 per quintal for fast reopening quality of sugarcane-Writ petition filed by Sugar Mills Association for quashing the order of State Government-High Court quashing order of U.P. State Government-Whether the State Government has any statutory power to fix the State Advised Price of sugarcane and compel the sugar factories to pay the said price-(Yes).

       Majority Judgment [S. Rajendra Babu, CJI, G.P. Mathur, K.G. Balakrishnan, JJ.]

       Held : Under Sub-section (1) of Clause 3 of the 1966 Order, the Central Government can only fix a minimum price of sugarcane. This clause should be read along with Sub-clause (2) which creates an embargo or prohibition that no person shall sell or agree to sell sugarcane to a producer of sugar and no such producer shall purchase or agree to purchase sugarcane at a price lower than that fixed under Sub-clause (1). The inconsistency or repugnancy will arise if the State Government fixed a price which is lower than that fixed by the Central Government. But, if the price fixed by the State Government is higher than that fixed by the Central Government, there will be no occasion for any inconsistency or repugnancy as it is possible for both the orders to operate simultaneously and to comply with both of them. A higher price fixed by the State Government would automatically comply with the provisions of Sub-clause (2) of Clause 3 of 1966 Order. Therefore, any price fixed by the State Government which is higher than that fixed by the Central Government cannot lead to any kind of repugnancy. (Para 37)

       A sugar factory normally runs in shifts for the whole day during the crushing season and it needs a continuous supply of freshly harvested sugarcane according to its daily crushing capacity which should be spread over the entire crushing season of about six months. The U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953, U.P. Sugarcane (Regulation of Supply and Purchase) Rules, 1954 and the U.P. Sugarcane Supply and Purchase Order, 1954, have been made to achieve that object. Any shortfall in supply of sugarcane to sugar factory will seriously affect its production resulting in huge losses. Therefore, the first and foremost requirement for the profitable running of the sugar factory is that it should get adequate quantity of sugarcane everyday throughout the crushing season and for ensuring this, a system of reserving or assigning an area in favour of sugar factory has been evolved under Section 15 of the Act. The reservation of an area ensures the supply of the entire sugarcane grown therein to the factory in whose favour it has been reserved. Similarly the assignment of an area ensures the supply of such quantity of sugarcane to the factory in whose favour it has been assigned as may be determined by the Cane Commissioner. Another advantage to the sugar factory is that sugarcane from its reserved or assigned area cannot be sold to any other factory in the vicinity even if it offers a higher price to a grower. This arrangement does not allow the market forces to operate and thereby completely avoids competition amongst the sugar factories which could lead to escalation in prices. It is common knowledge that every sugar factory is keen to have the maximum area reserved or assigned for it so that it may get adequate raw material. Sugarcane requires a particular type of soil and climatic condition and cannot be grown everywhere. The sugar factories are established in the sugar producing belt in close proximity with each other and very often there are competing claims for reservation or assignment of an area in their favour. It is for this reason that an appeal is provided under Section 15(4) of the Act against an order made under Section 15(1) of the Act by the Cane Commissioner reserving or assigning an area in favour of sugar factory. Once an area is reserved in favour of a factory the cane grower in the said area or the cane growers’ co-operative society operating therein gets tied to that factory and has to compulsorily enter into an agreement in prescribed proforma (Form B or Form C) given in the Appendix to 1954 Order. In view of Clause 5 of the said Order cane grown in the reserved or assigned area cannot be purchased by anyone without the previous issue of requisition slips and identification cards to the growers by the occupier of the factory and in the case of members of the cane growers co-operative society by such society. Since the requisition slips are non-transferable and they are issued by the sugar factory according to its requirement of sugarcane, it thereby completely controls the purchase of sugarcane from a reserved or assigned area. The terms of the agreement in Form B and Form C are also quite stringent as in the event of failure to supply at least eighty-five per cent of the agreed quantity of sugarcane the cane grower or the cane growers’ co-operative society has to pay compensation. Even in the event of a break down in the factory or its inability to purchase due to calamities or circumstances beyond human control, the cane grower or the cane growers’ co-operative society is not at liberty to make any other arrangement for disposal of cane except after giving a week’s notice to the factory and obtaining prior permission of the Cane Commissioner. Here too no compensation is payable by the factory to the cane grower or the cane growers’ co-operative society for the loss which may be suffered on this account. The provisions referred to above have been made for the benefit of the sugar factory so that it is assured of and gets a continuous supply of freshly harvested sugarcane in quantity according to its crushing capacity and for the whole duration of the crushing season. No doubt the cane grower also gets some advantage in the sense that purchase of his yield is assured but at the same time many limitations and restrictions are imposed upon him. In view of the aforesaid statutory provisions, the position of a cane grower becomes entirely different from that of a farmer producing any other kind of agricultural crop where there are absolutely no restrictions upon him. He is at absolute liberty to harvest his crop at his convenience without being dictated by a third party, to sell it to anyone whosoever he likes and whenever he wants. It is in this scenario, which is not the creation of the cane grower but of the statutory provisions operating in the field, that we have to examine the question whether the State has any authority or power to fix the price of the sugarcane supplied to a producer of sugar (sugar factory). (Paras 18 and 19)

       Bulandshahr, Meerut and Muzaffar­nagar are adjoining districts in Western U.P. but the prices of sugarcane range from Rs. 71.96 to Rs. 89.18. The Sugar mills at serial Nos. 2 and 6 are situate within the same district of Muzaffarnagar, but the difference in prices is almost Rs. 14.00. Similarly, sugar mills at serial Nos. 7 and 8 are situate within the same district of Pilibhit and serial No.9 is in adjoining district of Lakhimpur but the difference in prices is quite substantial. It is not likely that there would be any substantial difference in the quality of cane grown within the same district or in the same area. The prices fixed by the Central Government clearly indicate that a sugarcane grower who falls within the reserved area of a sugar mill run by U.P. State Sugar Corporation or by cooperative sector gets much less while as one who falls within the reserved area of sugar mill run by private sector gets much higher. This is possibly due to the reason that the sugar mills of U.P. State Sugar Corporation are very old having obsolete technology due to which recovery is poor. There is no justifiable reason why a sugarcane grower should suffer only on account of the fact that he happens to fall within the reserved area of a mill run by the U.P. State Sugar Corporation or in the cooperative sector. The State Government fixes uniform prices and not factory wise. Such a fixation of price is, therefore, more just and equitable from the point of view of a sugarcane grower. (Para 48)

       B.N. Srikrishna, J. [Dissenting Judgment]

       I have had the benefit of going through the erudite and well considered opinion of Brother G.P. Mathur, J. I regret, I am unable to share the views expounded by him, which constrains me to write this dissenting opinion. (Para 51)

       I would summarise my conclusions as under:-

        (1) It is not necessary to opine on the question as to whether the entire field of price is occupied by the Central Legislation, namely, the Essential Commodities Act, 1955.

        (2) The source of the State’s power claimed in C.A. No. 460 of 1997 is the U.P. Sugarcane Act, 1953 which has been the subject matter of careful analysis by the Constitution Bench of this Court in Ch. Tika Ramji’s case (supra). Its constitutional validity was upheld on the footing that the said Act did not trench upon the field of pricing.

        (3) There is no power discernible in the provisions of the U.P. Sugarcane Act, 1953 with the State Government to fix a price for sale/purchase of sugarcane so as to make it binding on the parties or legally enforce its payment.

        (4) The Sugarcane (Control) Order, 1966 itself enables parties to consensually agree to a rate higher than the rate prescribed therein. If such higher rate is agreed, then that would become the rate which the sugar producers would be obliged to pay and would also become substituted for the minimum rate so as to enable the State Government under the provisions of the U.P. Sugarcane Act, 1953 to enforce it in case of default by treating it as arrears of land revenue. (Para 121)

       P. Venkatarama Reddi, J. [Dissenting Judgment]

       I agree with Srikrishna, J., that there is no need to decide the constitutional question whether the fixation of price by the State Government clashes with the provisions of Sugar Control Order 1966 promulgated under the Essential Commodities Act. As and when the legislation is enacted by the State and the price is fixed by the State Government or other designated authority in terms of such statutory provision, the need may arise to test the validity of such provisions in the light of Article 254 of the Constitution. It is a well settled practice of this Court not to render a decision on a constitutional issue on hypothetical basis or in anticipation of future law, especially when the Union of ­India is not a party to these proceedings. I, therefore, express no view on the Constitutional issue relatable to Article 254. (Para 4)

       Now, a Summary of conclusions :

        (1) The State Advised Price has no statutory flavour. It is not fixed or purportedly fixed in exercise of any statutory power. It is only persuasive or recommendatory in nature. The sugar factories cannot be compelled or coerced to pay that price by taking any steps not sanctioned by law.

        (2) The U.P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 does not confer the power on the State Government to fix the price of sugarcane. Such power cannot be spelt out from section 16.

        (3) In view of conclusions (1) and (2) it is not necessary to express any opinion on the constitutional issue of repugnancy between the central and the state law. The finding recorded on this aspect by the Allahabad High Court in writ petition No. 36889 of 1996 is set aside. That question of law is left open.

        (4) The writ or direction issued in some of the writ petitions to ‘enforce’ the State Advised Price irrespective of the consent of the occupier of sugar factory is declared illegal and hereby set aside.

        (5) Although the State Advised Price has no sanction of law, the action of the State Government in notifying the State Advised Price and advising the sugar factories to comply with the same is not per se illegal. The State Advised Price can serve as the framework within which the agreement as to price can be reached between the cane growers and the sugar producers. Therefore, the orders issued by the State Government/Cane Commissioner communicating the fixation of State Advised Price need not be set aside.

        (6) There is no legal taboo against the State Government machinery playing a role in evolving an agreement between the cane growers and the sugar producers as to the price, without adopting any coercive methods.

        (7) Once the occupier of sugar factory reaches an agreement with the cane grower - may be on the persuasion of the state authorities, to pay the price equivalent to State Advised Price either by executing a formal agreement in this behalf or otherwise, the occupier of the factory is bound to pay such price and in case of default it can be recovered by the State authorities by coercive process laid down in the statute.

        (8) Whether or not there is an agreement to pay particular price is a question of fact. In the absence of express agreement, it is not impermissible to look into other evidence, if there is a dispute on the question of the price agreed to be paid. (Para 7)