2005 Supreme(SC) 10

2005(1) Supreme 90
Supreme Court of India
(From Andhra Pradesh High Court)
Ashok Bhan & A.K. Mathur, JJ.
Pallavi Refractories and Ors. etc. etc. —Appellants
versus
M/s. Singareni Colleries Co. Ltd. etc. etc. —Respondents
Civil Appeal Nos. 109-125 of 1999
With
Civil Appeal No. 15 of 2005
(Arising out of SLP (C) No. 2783 of 1999)
Decided on 4-1-2005
Counsel for the Parties :
For the Appellant in C.A.Nos. 109-125/1999 : T.N. Rao and P.P. Singh, Advocates.
For the Appellant in C.A.No. 15/2005 : D. Mahesh Babu, Advocate.
For the Respondents : Altaf Ahmed, Sr. Advocate, B. Partha Sarthy, Advocate.

Important pointClause 10 of the Price Notification ­fixing price for the coal did not violate the equality clause as by evolving the dual price policy and charging lesser price from the core sector industries, the classification made was not irrational.

Headnote:Essential Commodities Act, 1955—Section 16—Colliery Control Order 1945—Clauses 3 and 4—Price Notification No. 3/96-97 dated 14-3-1997—Fixing grades and prices of coal produced in India—Respondent, a state owned company issued the Price Notification No. 3/96-97 dated 14-3-1997—Clause 10 of the Notification provided that non core/unlinked sector industries are required to pay 20% additional price over and above the notified prices—Appellants, proprietors of various coal based small scale industries who draw ‘C’ and ‘D’ grade coal from respondent company challenged levy of additional price—Allegations that classification of linked and unlinked industries for the purpose of pricing was irrational—According to appellants, the non core/unlinked sector customers could not be charged more than what the respondent was charging from the core sector/linked sector customers—High Court dismissed the writ petitions with costs finding no infirmity in clause 10 of the Price Notification—Core sector industries were bulk consumers of about 90-95% of the coal produced—Whether resort to dual price fixation classifying its consumers into core sector/linked sector and non core sector/unlinked sector by charging different prices is discriminatory—(No).

       Held : In judicial review the Court is not concerned with the matters of economic policy. The Court does not substitute its judgment for that of the Legislature or its agent as to the matters within the province of either. The Legislature while delegating the powers to its agent may empower the agent to make findings of fact which are conclusive provided, such findings satisfy the test of reasonableness. In all such cases, the judicial enquiry is confined to the question whether the findings of facts are reasonably based on evidence and whether such findings are consistent with the laws of the land. The Court only examines whether the prices determined was with due regard to the provisions of the Statute and whether extraneous matters have been excluded while making such determination. It was further observed that price fixation is not within the province of the Courts. Judicial function in respect of such matters stands exhausted once it is found that the authority empowered to fix the price has reached the conclusion on rational basis. Seven industries, reference to which has already been made, have been identified as core sector consumers. These consumers are extended inter se priorities in the supply of coal by granting appropriate linkages. No linkage is required for Defence, Railways and for Exports. The coal linkages, as far as these industries are concerned, are monitored periodically by the Standing Linkage Committee. Guidelines for giving linkages are issued under the provisions of clause 8 of the Colliery Control Order, 1945 by the Central Government. The priority given to the linked customers in the matter of supply of coal are not under challenge before us. The industries which do not fall in the core sector are classified as non-core/unlinked sector industries. (Paras 14 and 15)

       In the present case admittedly the respondent is facing heavy financial deficit having accumulated loss of more than Rs. 1,000 crores. The decontrol of prices was done with the predominant object to enable the respondent and other coal companies which were in red to wriggle out of the financial predicament to some extent and to derive returns so as to prevent or minimise further losses. An industrial company completely held by the Government cannot be denied the right to keep in view the consideration of commercial expediency while formulating its policies in the discharge of its functions. Though absolute and unfettered freedom cannot be granted to the State-owned company but a wide latitude and flexible approach should be conceded to it especially when the price fixation is outside the realm of statutory control. Core-sector industries are of intrinsic importance to the economy of the country. They are given assured supply of coal by the Standing Linkage Committee which is a committee formed as per the guidelines of the Ministry of Coal, Government of India. The core sector industries consume nearly 90% of the entire production of the respondent company. In fact, the Power Sector consumes nearly 75% and the other industries consume nearly 15% of the entire production and only 10% or less is being drawn by other medium/small-scale industries.­ (Paras 16 & 17)

       The primary consideration for placing the seven industries in the core-sector is of their intrinsic importance to the economy of the country and the role which they play in the nation building activities. The same consideration will hold good for charging lesser price from them. The requirement of coal in the core-sector is on the higher side either for captive power generation or for other uses for the manufacturing operations. Any substantial increase in the price of coal shall have a substantial effect on the cost of finished products of vital importance and the cost of service to the public. Counsel for the respondent has submitted before us that 70% of the cement manufactured by the country is utilized by the Central or State Governments for the construction of projects, bridges, roads etc. Any increase in the price of coal supplied to the core industries would result in the increase of cost of essential commodities such as electricity, cement, and steel. The consumption of coal is quite high and is a major input of these industries. In the case of non-linked industries the coal consumption is minimal and the increase in the price will not result any appreciable increase in the cost of products manufactured by non-linked sector industries. (Para 18)

       The objective of dual pricing purportedly is to ensure that core-sector industries or customers are not unduly burdened with price increase while at the same time the respondent gets adequate return for its products so as to cover the financial deficit. There is no such law that a particular commodity cannot have a dual fixation of price. Dual fixation of price based on reasonable classification from different types of customers has met with approval from the courts. Monopolistic organizations like Electricity Boards, Petroleum Corporations are having dual price fixation. It is a common feature that Electricity Boards which generate power sell the power at different rates to different types of customers such as domestic, agricultural and industrial consumers. Even different types of industries are charged different rates. (Para 19)