The main legal point established in the judgment is that the Government had the right to issue directions regarding the sale and distribution of sugar, and the dealers were bound to comply with the same. The court also emphasized that the recovery of the price equalisation charge did not offend the petitioner's fundamental rights.

1. The petitioner is a wholesale dealer in sugar. Sugar is distributed to the dealers by the Government which controls and fixes the selling price of the commodity. The distribution and control of sugar is regulated by the provisions of the Kerala Sugar Dealers Licensing Order, 1967. Clause [2] [c] of the same defines 'free sale sugar' as sugar supplied by the State Government to the dealers directly by sugar factories from the quota allotted to them for free sale by the Central Government. Clause.2 [d] defines 'levy sugar' as sugar supplied by the State from the sugar made available to them by the Central Government. Clause.3, sub-clause [1] enacts that no person is to carry on business as dealer in levy sugar or free sale sugar except under and in accordance with the terms and conditions of a licence issued by the Licensing Authority. The petitioner was accordingly granted licence as a wholesale dealer for the sale of sugar. He executed an agreement dated 2nd April 1965, to the Governor of Kerala Clause.13 of the agreement stipulated that the wholesale dealers were bound to obey the directions regarding the proper sale and distribution of sugar issued from time to time by the specified authorities.. Ext. P-1 is a copy of the circular dated 15th February 1967, issued by the Board of Revenue and Civil Supplies, embodying certain directions. Para.4 of the same recalls the quota of sugar allotted to the Kerala State. Para.5 notes that the sugar is issued to the consumer taking into account the transport charges of the wholesale dealer, the margin of profit due to the wholesaler, administrative surcharge due to Government and the margin due to the retailer. Para.6 recalls the decision to fix the uniform price throughout the State for sugar; and in connection with the same, instructions to be issued are given in Para.7. Dealing with the wholesale stage of distribution of sugar, the same paragraph states that the wholesale dealer was not entitled to anything more than the actual transport charges and the margin of Rs. 2.68 per quintal. Sub-paragraph 6 of Para.7 relates to price equalisation charge which reads as follows:

"6 Price equalisation charge. The difference between the whole-sale issue price on the one hand, and the sum total of the ex-factory price of sugar, transport charge, margin to the dealer, administrative surcharge, and allowance for sales tax on gunny, on the other hand, will be collected from the wholesale dealer towards price equalisation charge, and credited to Government. Such price equalisation charges will become payable to Government in the case of sugar moved from factories in Madras, Mysore and Pondicherry."

Sub-paragraph 7 noticed that it was necessary to subsidise the sale of sugar to maintain the price level. For this purpose it was provided that the cost of sugar at the whole-sale stage will be worked out providing for transport charges, wholesaler's margin, administrative surcharge and provision for sales tax. From the total of these amounts, the price at which the wholesale dealer is to issue to the retailer will be deducted and the balance treated as subsidy payable to the dealer. In order to compensate the wholesale dealer for the loss incidental to underselling he was to be allotted a proportionately larger quantity of sugar from Madras State, so that the price equalisation charge on the Madras sugar will offset the loss incidental to the under-selling of Kerala sugar.

2. In pursuance of their powers to fix the price of sugar under the terms of the agreement, the Government have been fixing the prices. Exts. P-1, P-2, and P-3 filed by the petitioners, are copies of the orders or proceedings of the Government, thus fixing the prices. To take Ext. P-1 by way of example, that total retail selling price at Rs. 180. This is made up of:

Table:#1

Ext. P-2 follows on the same model, with the difference that the wholesale selling price is 182.00 and the retail selling price Rs. 185.00. In Ext. P-3,