JUDGMENT

SUJATA V. MANOHAR, J.— These appeals arise from a common judgment of the Andhra Pradesh High Court dated 3-2-1976 in OS Appeals Nos. 5, 7 and 9 of 1974. Some of the relevant facts for the purposes of these appeals are as follows.

2. The appellant K.C.P. Limited has a cement factory situated at Macherla in Guntur District, Andhra Pradesh. Prior to 1956 the Government of the composite State of Madras was considering establishment of a cement factory in Kurnool District of Rayalaseema, by a private enterprise. Mr V. Ramakrishna, Chairman of the appellant-Company offered to start such a factory and applied for a licence to start the factory, to the Government of India through the Government of Madras. At this time there was a proposal to construct a dam over River Krishna near Nandikonda. This project which was initially named Nandikonda Dam Project later came to be known as the Nagarjunasagar Project. It was proposed that the appellant would establish a cement factory at Macherla near the project site and would supply cement to the said project. The Chairman of the appellant-Company offered to supply cement to the Nagarjunasagar Project at the rate of Rs 48 per ton loose from the proposed factory site at Macherla. This is recorded in the letter dated 12-4-1955 from Mr. Ramakrishna to the Secretary to the Government of India in which he has stated that he was enclosing the final confirmation to supply cement for the said project at the rate of Rs48 per ton loose ex-factory. On 31-10-1955 the Government of India wrote a letter to the appellant saying that they proposed to issue a licence subject to the condition inter alia that almost the entire production of the factory shall be used locally by Nandikonda Dam Project (as it was then known) for the next 4 or 5 years. The Nandikonda Control Board, however, was desirous of getting the price of cement further reduced. It, therefore, continued negotiations with the appellant for a further reduction in the price of cement which was to be supplied for the said project. On 30-4-1956 there was a meeting of the Negotiating Committee of the Nagarjunasagar Control Board with the Chairman of K.C.P. Limited when it was agreed that the appellant-Company would charge Rs 47.50 per ton of portland cement plus excise duty and sales tax subject to variations upwards and downwards due to new taxation. For the supply during the period from 1-10-1956 to 31-3-1958, however, the rate charged would be the flat rate of Rs 47.50 per ton plus excise duty and sales tax without any variation. Thereafter the Nagarjunasagar Control Board desired that the draft agreement which was to be entered into with the appellant-Company should be scrutinized by the two State Governments concerned. It seems that drafts were exchanged between the parties but no concluded agreement was arrived at.

3. While these negotiations were going on the Cement Control Order, 1956 came into effect from 1-7-1956. In view of the coming into force of the Cement Control Order of 1956, in the draft agreement a clause was added to the effect that it would be subject to the sanction of the State Trading Corporation. This was because by virtue of the Cement Control Order, 1956, the State Trading Corpora .ion was appointed as a canalising agency for the purchase of cement at a controlled price fixed under the Cement Control Order of 1956.

4. When the Cement Control Order, 1956 came into effect the appellant had not started production of cement and hence the factory of the appellant was not mentioned in the Schedule to the Cement Control Order of 1956. The factory commenced production in February 1958. By this time the appellant was brought on the Schedule of the Cement Control Order on 25-1-1958. The appellant informed the State Trading Corporation on 2-2-1958 that it had entered into an agreement with Nagarjunasagar Control Board for the supply of cement for the said project at the concessional rate of Rs 47.50 per ton loose ex factory insta