Judgment

GROVER, J. :- These petitions under Article 32 of the Constitution have been brought by or on behalf of the various factories, Co-operative Societies and Mills which carry on the business of manufacturing and selling sugar (hereinafter called compendiously the "sugar producers") challenging the validity and legality of the Levy Sugar Supply Control Order 1972 made under Section 3 of the Essential Commodities Act, 1955, hereinafter called the Act fixing the price of levy sugar in the different zones in the country and praying for various reliefs. Writ Petitions Nos. 279 to 283, 293, 300, 303 and 306 of 1972 are by the sugar producers in Andhra Pradesh zone; Writ Petitions Nos. 297 and 304 of 1972 by the Sugar producers in North Bihar zone and Writ Petitions Nos. 296 and 298 of 1972 by those in the Punjab zone.

2. The principal questions that arise for our determination are the following :

(1) What is the true scope and ambit of Section 3 (3C) of the Act ?

(2) (a) Whether the system of fixing price for each zone (the entire country having been divided into 15 zones), is justifiable and is based on correct principles ?

(b) Whether the State-wise constitution of the zones is proper and justified ?

(c) Does the zonal system lead to discrimination and as such is violative of Article 14 of the Constitution ?

(3) Is price fixation based on proper principles and have the prices been determined by following the correct methods and in accordance with Section 3 (3C) of the Act ?

(4) What is the correct position about depreciation and rehabilitation allowance and the extent to which these have been taken into consideration in price fixation ?

(5) Have the escalations in various items by which price determination is made been properly allowed ?

(6) Whether the items in respect of payment of additional bonus as provided by the payment of Bonus Amendment Ordinance 1972 and gratuity are taken into account ?

3. The history of control over sugar production, its distribution and the method followed in the fixation of the fair or levy price of sugar has been set out in the connected case (Civil Appeals Nos. 1357 to 1369 of 1972, D/- 6-11-1972) = (reported in AIR 1973 SC 537) ) judgment in which also has been delivered today and the same ground need not be traversed again.

4. The first question formulated by us which arises in these writ petitions can be divided into two parts. The first part involves the point whether sub-section (3C) of Section 3 of the Act deals with levy sugar only and is confined to it alone, particularly, in the matter of determination of a reasonable return as provided by Clause (d) of that sub-section. In the writ petitions the argument on behalf of the sugar producers has been that the whole object of having a scheme of partial control under which 60 to 70% sugar has to be sold in accordance with the orders made by the Government under S. 3 (f) of the Act for which levy price is payable and the balance is saleable in the free market, would be defeated. The result of accepting an interpretation that profit on the free sale of sugar can be taken into account while considering whether a reasonable return has been allowed on the capital employed by the sugar producers would, it has been stressed, be contrary to the scheme and purpose of the sub-section in question. This aspect of the matter has been fully dealt with in the above connected case. We have held that fair price has to be determined in respect of the entire produce ensuring to the industry a reasonable return on the capital employed in the business of manufacturing sugar. In other words the contentions of the sugar producers have been repelled.

5. The second part of the first question is whether price fixation according to zones and not unitwise (we shall call this "the Zonal system") is permissible under Section 3 (3C) of the Act. According to that provision different prices may be determined from time to time for different areas or for different factories or for dif