IMPORTANT POINT
In fixing Statutory Minimum Price (SMP) only 50% of the entire sales realization is permissible if liability of excess realization also considered part of cost of production
Central Government would be within its power to direct sugar producers to sell sugar at price fixed by it.
Courts must step in when sugar price determination is in violation of statutory provisions.
Subordinate legislation can be questioned on any ground on which the primary legislation could be questioned.

Headnote:(a) Essential Commodities Act, 1955 – Section 3(2)(f) and 3(3C) – Section 3(2)(f) empowering Central Government to fix compulsory quota of sugar produced by a sugar producer along with the price thereof – Section 3(3C) provides factors relevant for such determination – Statutory Minimum Price (SMP) – Only 50% of the entire sales realization permissible if liability of excess realization also considered part of cost of production – Allegation of the Government continuing with 100% mopping up and not considering changed scenario – State Advisory Price (ASP) – Producer of sugar entitled to retain the amount paid to cane grower under Clause 5-A – The amount cannot be taken into consideration for determination of the price of levy sugar – Factors like mopping up as well as liability created towards cane growers have to be considered for determining price of sugar. (Para 15, 16, 21, 32)
       (1994) 1 SCC 648; (1997) 10 SCC 216 – Relied upon
       (1999) 7 SCC 246; (1999) 7 SCC 244 – Referred
       (1999) 9 SCC 245 – Distinguished
       (b) Essential Commodities Act – Section 3(2)(f) r/w Clause 5A, Sugarcane Control Order – Clause 5A – Central Government within its power to direct sugar producers to sell sugar at price fixed by it. (Para 44)
       JT 2001 (10) SC 527; (2002) 9 SCC 716; 1997 (1) UPLBEC 541 – Referred
       (c) Essential Commodities Act, 1955 – Section 3(2)(f) – Price determination – Legislative function – Courts will not interfere – However courts must step in when determination is in violation of statutory provisions. (Para 45, 47)
       (1990) 3 SCC 223; (1965) 3 SCR 439; (1973) 1 SCC 129; (1977) 4 SCC 471; (1988) 4 SCC 59; (1990) 3 SCC 223; (1990) 4 SCC 356; (2003) 5 SCC 36 – Referred
       (d) Interpretation of statute – Subordinate legislation – Challenge to – Can be questioned on any ground on which the primary legislation could be questioned. (Para 51, 53)
       (1985) 1 SCC 641; (2006) 3 SCC 434; 2006 (11) SCALE 108; 2008 (2) SCALE 484 – Relied upon
       (e) Essential Commodities Act, 1955 – Section 3(3C) – Fixing of sugar price – Central Government could not ignore any of the factors enumerated – Relevant factors – Actual cane price paid and excess realization from free market sales therefor – Only 50% mopping up permissible. (Para 54, 56)
       (1990) 3 SCC 223; (1994) 1 SCC 648 – Relied upon
       (1999) 9 SCC 245, (1999) 7 SCC 246; (1999) 7 SCC 244; JT 2001 (10) SC 527; (1997) 10 SCC 216 – Referred
       (f) Essential Commodities Act, 1955 – Section 3(C) r/w Clause 5A, Order and SAP – Purposive interpretation – It cannot be contended that element of additional price paid under Clause 5A not being specifically provided in section 3(C), it should be kept out of consideration. (Para 62)
       (1994) 1 SCC 648; 2007 (14) SCALE 556 – Relied upon
       (g) Interpretation of statute – Rules of executive construction – Statement of aims and objects – Carries great weight. (Para 67,
       (2002) 1 W.L.R.2956; (1993) A.C. 593; [2004] 1 A.C. 816 – Relied upon
       (2002) 9 SCC 716 – Distinguished
       Facts of the case:
       What are the factors which are required to be taken into consideration by the Central Government for determining the price of levy sugar in exercise of its power under Section 3(3C) of the Essential Commodities Act, 1955 (the Act) is the question involved herein.
       Finding of the Court:
       Mahalakshmi has wrongly been decided whereas Hari Nagar has correctly been decided.
       Result:
       Appeals arising out of SLP (C) Nos.481/2007 and 14130/2007 filed by Mahalakshmi Sugar Mills Co. Ltd. and Govind Nagar Sugar Ltd. respectively allowed and Appeals arising out SLP (C) Nos.14967-14978 of 2007 filed by Union of India & Ors. dismissed.

JUDGMENT:

S.B. Sinha, J.

1. Leave granted.

2. What are the factors which are required to be taken into consideration by the Central Government for determining the price of levy sugar in exercise of its power under Section 3(3C) of the Essential Commodities Act, 1955 (the Act) is the question involved herein.

3. Before us, there are various owners of sugar mills who purchased sugarcane from the farmers.

4. Section 3(2)(f) of the Act empowers the Central Government to fix compulsory quota of sugar produced by a sugar producer in the manner prescribed by the Central Government including the price thereof at which the same is to be sold. It is known as "levy sugar". The rest of the sugar, however, can be sold by the producers in free market. It is known as "free sugar".

5. The factors which are relevant to be taken into consideration by Central Government is contained in Section 3(3C) of the Act which includes:

(a) The minimum price, if any fixed for Sugarcane by the Central Government.

(b) The manufacturing cost of sugar.

(d) Securing a reasonable return on the Capital employed in the business of manufacturing, and different price may be determined from time to time for different areas or for different factories or for different kind of sugar.

6. In these appeals, we are concerned with the determination of price of sugar for the sugar years 1983-84 and 1984-85.

7. The Central Government, in exercise of its power conferred upon it under Section 3 of the Act, made an order known as the Sugarcane Control Order. Clause 5A of the said order reads, thus :

"Clause 5A. Additional price for sugarcane purchased on or after 1st October 1974:

(1) Where a producer for sugar or his agent purchases sugarcane, from a sugarcane grower during each sugar year, he shall, in addition to the minimum sugarcane price fixed under Clause 3, pay to the sugarcane grower an additional price, if found due, in accordance with the provisions of the second Schedule annexed to this Order.

XXX XXX XXX

(4) The additional price determined under sub- clause (2) or sub-clause (3) as the case may be, shall be paid by the producer of sugar to the sugarcane grower, at such time and in such manner as the Central Government or the State Government, as the case may be, from time to time, direct.

(5) No additional price determined under sub- clause (2) or sub-clause (3), as the case may be, shall become payable by a producer of sugar who pays a price higher than the minimum sugarcane price fixed under clause (3) to the sugarcane grower.

Provided that the price so paid shall in no case be less than the total price comprising the minimum sugarcane price fixed under clause (3) and the additional price fixed determined under sub-clause (2) or sub- clause (3), as the case may be. (6) Where any extra price is paid by the producer of sugar to the sugarcane grower for the supply sugarcane in addition to the minimum sugarcane price fixed under clause (3), the extra price so paid shall be adjusted against the additional sugarcane price determined under sub-clause (2) or sub- clause (3), as the case may be, and the balance, if any, shall be paid to the sugarcane grower.

(7)** Subject to the provisions of sub-clause (4), the additional price shall become payable to a sugarcane grower, if he, in performance of his agreement with a producer of sugar, supplies not less than 85% o the sugarcane so agreed:

(* Provided that the Central Government or the State Government as the case may be, may if it is satisfied that the appellant had sufficient cause for not preferring the appeal within a further period of thirty days, admit if presented within a further period of fifteen days.

(**Provided that the additional price shall become payable to a sugar grower even when he supplies less than 85% of the sugarcane so agreed, if for the same supply he has not been subjected to any penalty by

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2008 Supreme(SC) 572

Cases Referred (17)