Judgment

RAY C. J. :- The petitioners challenged Notifications No. CER/ 3/73 dated 13 March, 1973 and CER/ 16/73 dated 13 March, 1973 described as the first and the second impugned notifications.

2. There was unprecedented and phenomenal rise in cotton prices in the closing months of 1970 and in January, 1971. There was a very low cotton crop in 1970-71 season . There was a perceptible drop in yarn production. Yarn is produced in hanks for handloom and cones, beams and prins for powerlooms and cones for hosiery industry. There was rise in prices. This strengthened the hands of the weavers in their agitation. The Yarn Pool Scheme was devised in February, 1971. This was a voluntary effort on the part of the cotton mill industry to afford some relief to small weavers in the handloom and powerloom sector. The scheme covered cotton yarn in counts of 20s, 30s and 40s both in hanks and hosiery cones and in counts of 20s, 24s, 30s, 34s and 40s in weaving cones. Under this scheme the mills participating in it had to supply yarn at prices equivalent to the average of prices ruling in the last quarter of 1970. As a compensation the participating mills were allotted foreign cotton at a concessional rate of premium and were permitted to sell such cotton in the market. The yarn thus made available was allocated to the various States by the Textile Commissioner. The quantity of yarn covered by the Pool Scheme depended upon the quantum of foreign cotton made available for the purpose.

3. In the second quarter of 1972 prices of superfine counts, namely, 60s and above began to rise. The causes were first, shortfall in production caused by prolonged labour strike in Coimbatore and other textile centres in Tamil Nadu; second, an increase in the spindle cost of foreign cotton; third revival of export demand for cotton yarn, and fourth, large scale unauthorised despatch to foreign countries. In order to arrest this trend the industry reached an understanding with the Textile Commissioner in July, 1972. Under this agreement the mills were to supply 50 per cent of the yarn of 60s and above meant for sale in the market at agreed prices. The agreed prices were the average of the highest contract price in January, 1972 and the highest contract price on 1 June, 1972 or near about the date. This price was known as the "regulated price". The arrangement came into force from 1 August, 1972.

4. This scheme suffered a setback in the last quarter of 1972. This was because of severe power cuts in Tamil Nadu, Uttar Pradesh, Gujrat, Maharashtra, Punjab, Haryana, Mysore and Andhra Pradesh. The downward trend in production which had begun to manifest in the last quarter had begun to manifest in the last quarter of 1972 gathered further momentum in the first quarter of 1973. As compared with the third quarter of 1972 when the production was the highest the fall in yarn and cotton production in the first quarter of 1973 was 15 per cent and 12 per cent respectively. The decline was 6 per cent in yarn and 7 per cent in cloth production compared with the same period of 1972. There was of course a prolonged labour strike in February, March 1972, in Coimbatore and for a short period elsewhere in Tamil Nadu. There was a marked fall in production in that State. It may be stated here that Tamil Nadu has 23 per cent of India s total spindleage and 4.4 per cent of loornage. The bumper crop in 1971-72 season had, impact on yarn and cloth production in the second quarter of 1972.

5. Early in 1973 the upward trend of yarn prices rose in fine and superfine counts. The Southern India Millowners Association offered to the Government the entire free yarn production of all counts of its member mills at prices to be mutually agreed to between the industry and the Textile Commissioner. The Southern Association wanted the Indian Cotton Mills Federation to take the initiative for arriving at an understanding with the Government at an all-India level. The mills in North India were of the view