1. Challenge to notification fixing ex-factory prices of an essential commodity under the Essential Commodities Act and related control orders. (Para 1 , 2 )
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1959 Supreme(SC) 10
SUPREME COURT OF INDIA
23rd January, 1959.
S.R. DAS, C.J.I., S.J. IMAM, S.K. DAS, K.N. WANCHOO AND M. HIDAYATULLAH, JJ.
M/s. Diwan Sugar & General Mills (Private) Ltd., and others, Petitioners
Versus
The Union of India, Respondent.
1. The Amritsar Sugar Mills Co. Ltd., Rohana Kalan (Dist. Muzaffarnagar); 2. Sir Shadi Lal Sugar and General mills Ltd., Mansurpur (Dist. Muzaffarnagar), 627 3. M/s. L. H. Sugar Factories & Oil Mills Ltd., Kashipur (Dist. Nainital), 4. M/s. Simbhaoli Sugar Mills Ltd., Simbhaoli (Dist. Meerut) 5. M/s. Sasamusa Sugar Works Ltd., Sasamusa (Dist. Saran), 6. M/s. Ratna Sugar Mills Co., Ltd., Shahganj (Dist. Jaunpur), 7. M/s. L. H. Sugar Factories & Oil Mills Ltd., Pilibhit, 8. M/s. Maheshwari Khetan Sugar Mills (P) Ltd., Ramkola (Dist. Deoria), 9. M/s. H. R. Sugar Factory Ltd., Bareilly, 10. M/s. Motilal Padampat Sugar Mills Co. Ltd., Bhatni (Dist. Deoria), 11. M/s. Punjab Sugar Mills Co., Ltd., Ghughli, 12. M/s. Panji Sugar & General Mills Co., Bulandshahr, 13. M/s. Nawabganj Sugar Mills Co., Lid., Nawabganj, (Dist. Conda), Interveners.
Writ Petn. No. 134 of 1958.
Advocates appeared
Mr. N. C. Chatterjee, Senior Advocate (M/s. K. P. Mukherjee, P. D. Himatsinghka, and B. P. Maheshwari, Advocates, with him), for Petitioners; Mr. M. C. Setalvad, Attorney-General for India and Mr. B. Sen, Senior Advocate, (Mr. R. H. Dhebar, Advocate, with them), for Respondent; M/s. K. P. Khaitan, K. P. Mukherjee and B. P. Maheshwari, Advocates, for Interveners 1 to 10; Mr. G. S. Pathak, Senior Advocate (M/s. K. P. Mukherjee and B. P. Maheshwari, Advocates, with him), for Interveners 11 to 13.
Advocates:
B.P.MAHESHVARI, B.SEN, G.S.PATHAK, K.P.KHAITAN, K.P.MUKHERJI, M.C.SETALVAD, N.C.CHATTERJI, P.D.HIMATSINGHKA, R.H.Dhebar
B.P.MAHESHVARI, B.SEN, G.S.PATHAK, K.P.KHAITAN, K.P.MUKHERJI, M.C.SETALVAD, N.C.CHATTERJI, P.D.HIMATSINGHKA, R.H.Dhebar
The government may fix ex-factory prices of essential commodities in surplus regions to ensure fair retail prices nationwide. Such action is not discriminatory or an unreasonable restriction on trade if based on relevant cost factors and serves the public interest of equitable distribution.
Headnote:(A) Essential Commodities Act, 1955 - Section 3 - Sugar (Control) Order, 1955 - Clause 5 - Constitution of India - Article 19(1)(g) and Article 32 - Fixation of ex-factory prices of essential commodities - Whether fixing prices at the ex-factory stage is sufficient to ensure fair prices for consumers - Whether such fixation constitutes an unreasonable restriction on the right to trade - Whether regional price control in surplus areas is discriminatory - Power to control prices under the Act is general and allows control at any stage of sale or purchase, including ex-factory, wholesale, or retail, to achieve the objective of equitable distribution and fair pricing (Paras 7, 8) - Fixation of prices based on relevant factors such as manufacturing cost and reasonable profit margins does not violate the right to trade under Article 19(1)(g) (Para 9) - Price control in primary surplus areas that feed deficit areas does not amount to discrimination as it effectively stabilizes prices nationwide (Para 10).
(B) Administrative Law - Exercise of power to fix prices - Absence of a statutory right of appeal against price fixation orders issued in the interest of the general public does not render the action arbitrary or illegal, provided the power is exercised according to the prescribed factors and guidelines (Para 9).
Facts of the case:
Petitioners challenged a government notification fixing ex-factory prices for sugar in specific surplus regions. They contended that the prices were fixed below the cost of production, were arbitrary, and were discriminatory because they did not apply to all regions of the country nor did they fix retail prices for the ultimate consumer.
Findings of Court:
The court found that the government acted within its authority under the relevant Act and Order. The fixation of ex-factory prices in surplus areas was a valid means to ensure fair prices for the general public. There was no evidence that the prices were arbitrarily fixed below the cost of production, as the government had considered relevant market prices and manufacturing factors.
Issues: Whether the fixation of ex-factory prices in specific regions was beyond the authority of the Act, whether it constituted an unreasonable restriction on the right to trade under Article 19(1)(g), and whether the regional application of the price control was discriminatory.
Ratio Decidendi: The court held that the power to control prices under the Essential Commodities Act is not limited to the retail stage. Fixing prices at the ex-factory level in surplus regions is an effective way to stabilize prices nationwide and does not constitute discrimination or an unreasonable restriction on trade, provided relevant cost factors are considered and the action serves the public interest of equitable distribution.
Result: Petition dismissed with costs.
Legal Category Hierarchy
Table of Contents
2. Notification exceeds statutory authority, violates right to trade under Article 19(1)(g) by fixing arbitrary prices, and is discriminatory across different regions. (Para 2 , 4 )
3. Price fixation at the ex-factory stage can ensure fair consumer prices; regional control in surplus areas effectively regulates national prices without discrimination. (Para 5 , 6 , 7 , 8 , 9 , 10 )
4. Statutory power to control prices of essential commodities allows fixation at any stage of sale to ensure availability at fair prices for consumers. (Para 7 , 8 )
5. Petition dismissed with costs. (Para 11 )
6. Can the government fix prices only at the ex-factory stage to ensure fair prices for consumers?
Yes. The power to control prices under the Essential Commodities Act is general and allows fixation at any stage (ex-factory, wholesale, or retail). If fixing the ex-factory price suffices to ensure fair prices for the general public, the government is not required to fix wholesale or retail prices. (Para 7 , 8 )
7. Does fixing prices for only certain surplus-producing regions constitute illegal discrimination?
No. If the controlled regions are the primary surplus areas that supply the rest of the country, controlling prices in those areas effectively stabilizes prices nationwide, meaning there is no practical discrimination against other regions. (Para 10 )
8. Is a price-fixation notification an unreasonable restriction on the right to trade under Article 19(1)(g) if it lacks an appeal mechanism?
No. In the interest of the general public, the government's power to fix prices does not require a statutory appeal mechanism, provided the power is exercised according to the Act and considers relevant factors like production costs and profit margins. (Para 9 )
Judgment
K. N. WANCHOO J.: This petition under Art. 32 of the Constitution challenges the legality of the notification dated July 30, 1958, (hereinafter called the impugned notification), issued by the Government of India fixing the ex-factory price per maund of sugar produced in Punjab, Uttar Pradesh and North Bihar. It has been supported by two sets of interveners consisting of sugar factories in these areas who did not join the petition.
2. The case of the petitioners is that the Essential Commodities Act, (X of 1955), (hereinafter called the Act) was passed by Parliament in 1955, for the control of the production, supply and distribution of, and trade and commerce in, certain commodities which included sugar. By S. 3 of the Act, the Central Government was given the power, if it was of opinion that it was necessary or expedient so to do for maintaining or increasing supplies of any essential commodity or for securing their equitable distribution and availability at fair prices, to provide by order for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein. Section 3(2) further provided inter alia for controlling the price at which any essential commodity might be bought or sold. In exercise of these powers, the Central Government promulgated the Sugar (Control) Order, 1955, (hereinafter called the Order) on August 27, 1955. Clause 5 of the Order gave power to the Central Government, by notification in the Official Gazette, to fix the price or the maximum price at which any sugar might be sold or delivered, and different prices might be fixed for different areas/factories or different types or grades of sugar. Such price or maximum price had to be fixed with due regard to various factors, with which we shall deal later. On June 27, 1958 the Central Government promulgated the sugar Export Promotion Ordinance, No. V of 1958, empowering it to appoint an export agency for carrying out the work of buying sugar in the Indian market and exporting the same to foreign markets and fixing the quantity of sugar for export. The Central Government was also authorised by that Ordinance to fix quotas apportioning the quantity of sugar to be supplied by each factory for export and levy an additional excise duty at the rate of Rs. 17 per maund on any factory failing to deliver its quota of sugar for export. On the same day, three notifications were issued: (1) fixing 50,000 tons of sugar as the quantity to be exported out of India during the period ending October 31, 1958, (2) appointing the Indian Sugar Mills Association, Calcutta, as the export agency, and (3) delegating the powers conferred on the Central Government to the Chief Director of Sugar and Vanaspati, Ministry of Food and Agriculture also. Then followed the impugned notification fixing ex-factory prices of sugar produced by the factories in Punjab, Uttar Pradesh and North Bihar. It is being challenged on the ground that the price fixed is considerably below the cost of production and ignores various factors affecting the cost of production and distribution of sugar including charges incidental to sale and distribution. The impugned notification is also attacked on the ground that it did not fix any price at which the persons purchasing sugar from the mills would sell it, so that it was open to the middleman who bought sugar from the factories to sell it at any price, us creating discrimination between factories and factories and between the producers selling sugar and the middlemen who buy sugar selling the same in their turn. It is also alleged that fixing of the price was arbitrary and did not take into account the cost of production of a large number of units in the country and did not provide for a fair and equitable distribution of sugar in the country at a price in any way related to the price at which the factories were compelled to sell their products. Consequently, the petitioners prayed for an appropriate order, direction
