SHRI SITARAM SUGAR COMPANY LIMITED & ANR. ETC. v. UNION OF INDIA & ORS

Citation: [1990] 1 S.C.R. 909

Court: Supreme Court of India

Bench: SABYASACHI MUKHERJI, K. JAGANNATHA SHETTY, A.M. AHMADI, T.K. THOMMEN, K.N. SAIKIA

Case summary

The >-petitioners do not, and cannot, challenge the validity of the subsection by reason of Article 3lB of the Constitution of India. This Court has thus in Anakapalle (supra) rejected the argument that the alleged loss incurred by certain sugar producers is attributable to...

Judgment text

The Judgment of the Court was delivered by THOMMEN, J. The petitioners are· owners of sugar mills ,. i. _ operating in the State of Uttar Pradesh in areas classified for the purpose of determining the price of levy sugar as West and East Zones. They challenge the validify of notifications dated 28th I) November, 1974 and 11th July, 1975 (Annexures 8 & 9) issued by the Central Government in exercise of its power under sub-section (3-C) of section 3 of the Essential Commodities Act, 1955 (Act No. 10 of 1 1955), as amended to date (hereinafter referred to as the 'Act'). The >-petitioners do not, and cannot, challenge the validity of the subsection by reason of Article 3lB of the Constitution of India. By the impugned orders, the Central Government fixed the prices of levy sugar for 1974-75 production. For the purpose of determining the 1 prices, the country is divided into 16 zones, and the prices.

fixe,d for i ~ various grades of sugar in terms of section 3 (3-C) of thelAct vary1from zone to zone. Prices are determined with reference to the geographical-cum-agro-economic considerations and the average cost profiles of -- --- "A pdce fixation measure does not concern itself with the interests of an individual manufacturer or producer. It is generally in relation to a particular commodity or class of commodities or transactions. It is a direction of a general character, not directed against a particular situation. It is intended to operate in the future. It is conceived in the interests of the general consumer public. The dght of the citizen to obtain essential articles at fajr pdces and the duty of the State to so provide them are transformed into the power of the State to fix pdces and the obligations of the producer to charge no more than the pdce fixed.

Viewed from whatever angle, the angle of general application, the prospectiveness of its effect, the public interest served, and the rights and obligations flowing therefrom, there can be no question that price fixation is ordinarily a legislative activity". The learned Judge emphasises: SITARAM SUGAR CO. LTD. v. U. 0. 1. ITHOMMEN, J. ] 941 "Price fixation may occasionally assume an administrative or quasi-judicial character when it relates to acquisition or requisition of goods or property from individuals and it becomes necessary to fix the price separately in relatiqn to such individuals. Such situations may arise when the owner of property or goods is compelled to sell his property or goods to the government or its nominee and the price to be paid is directed by the legislature to be determined according to the statutory guidelines laid down by it. In such situations the determination of price may acquire a quasijudicial character".

These observations have been cited with approval by one of us (Sabyasachi Mukharji, J. , as he then was) in Renusagar (supra). In Saraswati Industrial Syndicate Ltd. etc. v. Union of India, [1975] 1SCR 956 at 961, this Court states: "Price fixation is more in the nature of a legislative measure even though it may be based upon objective criteria found in a report or other material. It could not, therefore, give rise to a complaint that a rule of natural justice has not been followed in fixing the price". In Prag Ice & Oil Mills & Anr. etc. v. Union ofIndia, [1978] 3 SCR 293 at 317, Chandrachud, J. , as he then was, speaks forthe majority: "We think that unless, by the terms of a particular statute, or order, price fixation is made a quasi-judicial function for specified purposes or cases, it is really legislative in character in the type of control order which is now before us because it satisfies the tests of legislation.

A legislative measure does not concern itself with the facts of an individual case. It is meant to lay down a general rule applicable to all persons or objects or transactions of a particular kind or class". See also the observation of Megarry, J. , as he then was, in Bates v. Lord Hai/sham of St. Marylebone & Ors. , [1972] 3 All ER 1019 at 1024. The impugned orders, duly published in the official gazettes notifying the prices determined for sugar of various grades and pro- duced in vanous zones, and applicable to all producers of such sugar, can, in our view, be legitimately characterised as legislative. These orders are required by ·sub-section (6) to be laid before both Houses of Parliament. The notified prices are applicable without exception to all persons falling within well defined groups. The prices are determined in accordance with the norms postulated in the sub-section.

It is with 8 reference to such predetermined prices of sugar that the "amount" payable to each producer, who has sold sugar in compliance with an order made with reference to clause (f) of sub-section (2), is calculated. The calculation of such amount is, in contradistinction to the determinatio)l of "price of sugar", a non-legislative act. Thus, while individual consideration is relevant to the calculation of the "amount", it is not so for the determination of the "orice of sugar" which is the rate at which the amount is calculated. That orice. as stated in Panipat (supra) is to be arrived at by a process of costing with reference to a reasonably efficient and economic representative cross section of manufacturing units. In this connection, we must point out that at first blush a certain obsezyation of Chinnappa Reddy, J. in Cynamide, [1987) 2 SCC 720 at 741, on which much reliance is placed by the petitioners' counsel, ~-. appears to be inconsistent with what we have now stated.

The learned Ju'dge says: "The Order made under Section 3(2)(c), which is not in respect of a single transaction, nor directea IO a particular individual is clearly a legislative act, while an Order made under Section 3(3-C) which is in respect of a particular transaction of compulsory sale from a specific individual is a non-legislative act". It would appear that what the learned Judge had in mind was an order by which the "amount" was calculated in terms of sub-section (3-C) in respect of each individual producer and not an order determining the "price of sugar". While the former is non-legislative, the latter, by the o very test adopted by the learned Judge, is legislative in character. We, therefore, understand the observation of the learned Judge on this point as applicable only to the individual order fixing the "amount" in terms of the sub-section and not to orders determining the "price of sugar" which are what the impugned orders are.

Any other construction of the sub-section would conflict with what was adopted by the Constitution Bench in Panipat (supra) and would, therefore, be unsustainable. SITARAM SUGAR CO. LTD. v. U. 0. 1. (THOMMEN, J. ] 943 The individual orders, calculating the "amount~"payable to the individual producers, being administrative. orders founded on the machanics of price fixation, they must be left to the better instructed judgment of the executive, and in regard to them the principle of audi alteram partem is not applicable. All that is required is reasonableness and fair play which are in essence emanations from the doctrine of natural justice as explained by this Court in A. K. Kraipak & Ors. etc. v. Union of India & Ors. , [1970] 1SCR457. See also the observation of Mukharji, J. , as he then was, in Renusagar, [1988] 4 SCC 103, 105. Price fixation is in the nature of a legislative action even when it is basep on objective criteria founded on relevant material.

No rule or natural justice is applicable to any such c)rder. It is nevertheless imperative that the action of the authority should·bJ' inspired by reason. Saraswati Industrial Syndicate Ltd. , [1975] 1 SCR 956. 961, 962. The Government cannot fix any arbitrary price. It cannot fix prices on extraneous considerations: Renusagar, (supra). Any arbitrary action, whether in the nature of a legislative or administrative or quasi-judicial exercise of power, is liable to attract the prohibition of Article 14 of the Constitution. As stated in E. P. Royappa v. State of Tamil Nadu & Anr. , [1974] 2 SCR 348, "equality and arbitrariness are sworn enemies; one belongs to the rule of law in republic while the other, to the whim and caprice of an absolute monarch. " Unguided and unrestricted power is affected by the vice of discrimination: Mrs. Maneka Gandhi v. Union of India & Anr. , [1978] 1 sec 248 at 293-294.

The principle of equality enshrined in Article 14 must guide every state action, whether it be legislative, executive, or quasi-judicial: Ramana Dayaram ·shetty v. The International Airport Authority of India & Ors. , [1979] 3 SCR 1014 at 1042; Ajay Hasia & Ors. v. Khalid Mujib Sehravardi & Ors.. [1981] 1 SCC. 722 and D. S. Nakara & Ors. v. Union ofIndia, [1983] 1SCC305. Power delegated by statute is limited by its terms and subordinate to its objects. The delegate must act in good faith, reasonably, intra vires the power granted, and on relevant consideration of material facts. All his decisions, whether characterised as legislative or administrative or quasi-judicial, must be in harmony with the Con- --.. _ stitution and other laws of the land. They must be "reasonably related to the purposes of the enabling legislation". See Leila Molirning v. Family Publications Service, 411 US 356, 36 L Ed. 2d 318.

If they are manifestly unjust or oppressive or outrageous or directed to an unauthorised end or do not tend in some degree to the accomplishment of the objects of delegation, courts might well say, "Parliament never intended to give authority to make such rules; they are unreasonable and ultra vires". per Lord Russel of Killowen, C. J. in Kruse v. Johnson, (1988] 2 Q. B. 91, 99. The doctrine of judicial review implies that the repository of power acts within the bounds of the power delegated and h-e does not abuse his power. He must act reasonably and in good faith. It is not only sufficient that an instrument is intra vires the parent Act, but it must also be consistent with the constitutional principles: Maneka Gandhiv. Union ofIndia, [1978] 1SCC248,314-315. Where a question of law is at issue, the Court may determine the rightness of the impugned decision on its own independent judgment.

If the decision of the authority does ,not agree with that which the Court considers to be the right one, the finding of law by the authority is liable to be upset. Where it is a finding of fact, the Court examines only the reasonableness of the finding. When that finding is found to be rational and reasonably based on evidence, in the sense that all relevant material has been taken into account and no irrelevant material has influenced the decision, and the decision is one which any reasonably minded person acting on such evidence, would have come to, then judicial review is exhausted even though the finding may not necessarily be what the Court would have come to as a trier of fact. Whether an order is characterised as legislative or administrative or quasi-judicial, or, whether it is a determination or law or fact, the fudgment of the expert body, entrust.

ed with power, is generally treated as final and the judicial function is exhausted when it is found to have "warrant in the record" and a rational basis in law: See Rochester Tel. Corp. v. United States, [1939] 307 U. S. 125, 83 L. Ed. 1147. See also Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, [1948] 1K. B. 223. As stated by Lord Hailsham of St. Marylebone L. C. , (H. L. ) in Chief Constable of the North Wales Police v. Evans, [1982] 1 WLR 1155 at 1160-61: "The function of the court is to see that lawful authority is not abused by unfair treatment and not to attempt itself the task entrusted to that authority by the law The purpose of judicial review is to ensure that the individual receives fair treatment, and not to ensure that the authority, after according fair treatment, reaches on a matter SITARAM SUGAR CO. LTD. v. U. 0. I. [TIIOMMEN, J. ] 945 which it is authorised by law to decide for itself a conclusion which is correct in the eyes of the court'i.

In the same case Lord Brightman says: "Judicial review, as the words imply, is not an appeal from a decision, but a review of the manner in which the decision was made". A repository of power acts ultra vires either when he acts in excess of his power in the narrow ~ense or when he abuses his power by acting in bad faith or for an inadmissible purpose or on irrelevant grounds or without regard to relevant considerations or with gross unreasonableness. See Associated Provincial Picture Hoiises Ltd. v. Wednesbury Corporation, [1948] 1 K. B. 223. In the words of Lord Macnaghten in Westminster Corporation v. London and North Western Railway, [1905] AC 426, 430: . " ..... It is well settled that a public body invested with statutory;powers such as those conferred upon the ,Corporation must take care not to exceed or abuse its powers. It must keep within the limits of the authority committed to it. It must act in good faith. And it must act reasonably.

The last proposition is involved in the second, if not in the first ..... ". ' In The Barium Chemicals Ltd. & Anr. v. The Company Law Board & Ors:, [1966] Supp. SCR 311, this Court states: " ..... Even ·if (the statutory order) is passed in good faith and with the best of intention to further the purpose of the legislation which confers the powers, since the Authority has to act in accordance with and within the limits of that legislation, its order can also be challenged if it is beyond those limits or is passed on grounds extraneous to the legislation or if there are no grounds_ at all for passing it or if the grounds are such that no one can reasonably arrive at the opinion or satisfaction requisite under the legislation. In any one of these situations it can well be said that the authority did not honestly forrn its opinion or that in forming it, it did not iapply its mind to the relevant facts"-. . In Renusagar, [1988] 4 SCC 59, 104, Mukharji, J.

, as he then was, states: "The exercise of power whether legislative or administrative will be set aside if there is manifest error in the exercise of such power or the exercise of the power is manifestly arbitrary. Similarly, if the power has been exercised on a non-consideration or non-application of mind to relevant factors the exercise of power will be regarded as manifestly erroneous. If a power (whether legislative or administralil tive) ·IS exercised on the oasis of facts which do not exist. and wh! Ch are patently erroneous, such exercise of power will stand vitiated". ~- The true position, therefore, is that any act of the repository of power, whether legislative or administrative or quasi-judicial, is open to challenge ·if it is in conflict with the Constitution or the governing Act or the general principles of the law of the land or it is so arbitrary .... or unreasonable that no fair minded authority could ever have made it.

" The impugned orders are undoubtedly based on an exhaustive 0 study by experts. They are fully supported by the recommendations of the Tariff Commission in 1969 and 1973. It is true that these recommendations in some respects were the subject matter of criticism by a subsequently appointed expert body, viz. , the BICP. Apart from the fact that the BICP's criticism has not been accepted by the Government, that criticism is not relevant in so far as the impugned orders are concerned because the latter are in regard to an earlier period. These ~ orders are fully supported by the relevant material on record. The conclusions reached by the Central Government in exercise of its .. --statutory power are expert conclusions which are not shown to be either discriminatory or unreasonable or arbitrary or ultra vire~. The -"( (11) ,,See the observation of Lord Russel in Krnse v. Johnson, 11898] 2 Q. B. -91 and that of Lord Greene, M. R. in Associated Provincial Picture Houses Ltd. v.

Wednesbury Corporation, [1948] 1 K. B. 223; See also Mixnam Properties Ltd. v. Chertsey U. D. C. , [1%51AC735; Commis· sioners of Customs and Excise v. Cure and_Deeley Ltd. [1962] 1 Q. B. 340; McEldowney v. Forde, [1971] AC 632 (H. L. ); Carltona Ltd. v. Commissioners of Works, [1943) 2 All ER 560, 564; Point of Ayr. Collieries Ltd. v. Lloyd George, [1943] 2 All ER 546; Scott v. Glasgow Corporation, [1899] AC 470, 492; Robert Baird L. D. v. City of "----- Glasgow, [1936] AC 32, 42; Manhattan General Equipment Co. v. Commissioner, [1935[ 297 US 129, 134; Yates (Arthur) & Co. Pty. Ltd. --- ' v. Vegetable Seeds Commjttee, [1945-46] 72 CLR 37; Bailey v. Conole, ·- [1931] 34 WALR 18; Boyd Builders Ltd. v. City of Ottawa, [1964] 45 DLR (2d) 211; Re Burns and Township ofHaldimand, [1966] 52 DLR ! II (2d) 1014 and Lynch v. Tilden Produce Co. 265 US 315, 320-322. SITARAM SUGAR CO; LTD. v. U. 0. 1. [THOMMEN, J.

} 947 material brought to our notice by the petitioners does not support the arguments at the bar that the Central Government has not applied its mind to the relevant questions to which they are expected to have regard in terms of the statute. That the sugar factories for the purpose of determining the price of sugar in terms of sub-section (3-C) should be grouped on the basis of their geographical location is a policy decision based on exhaustive expert conclusions. Factories are classified with due regard to geographical-cumagro-economic considerations. Fair prices for different grades of sugar are determined for each zone with reference to a reasonably efficient and economic representative cross-section of the manufacturing units. Such classification, as held in Panipat (supra) and Anakapalle (supra) cannot, in the absence of evidence to the contrary, be characterised as .

arbitrary or unreasonable or not founded on an intelligible differentia having a rational nexus with the object sought to be achieved by subsection (3-C). The person assailing such classification "carries the heavy burden of making a convidng showing that it is invalid because it is unjust and unreasonable in its consequences" Federal Power . Commission v. Hope Gas Co. , 320 US 591, 602 (1944). If the petitioners nevertheless incur losses, such losses need not necessarily have arisen by reason of geographical zoning, but for reasons totally unconnected . --( with it, such as the condition of the plant and machinery, quality of management, investment·policy, labour relations, etc. These are matters on which the petitioners have not furnished data, and, in any event judicial review is hardly appropriate for their consideration. In this connection we would recall the observations of Chinnappa Reddy, J. in Union of India and Anr. v. Cynamide India Ltd. and Anr. , (1987] 2 SCC 720 at p.

736: "We do not agree with the basic premises that price fixation primarily affects manufacturers and producers. Those who are most vitally affected are the consumer public. It is for their protection that price fixation is resorted to and any increase in price affects them as seriously as any decrease does a manufacturer, if not more. " 1 In M/s. Gupta Sugar Works v. State of U. P. and Ors. , [1987] Supp. SCC 476 at p. 481 one of us (Jagannatha Shetty, J. ) stated: "In this view of the matter, the primary consideration in the fixation of Price would be the interest of consumers rather than that of the producers. " The Court has neither the means nor the knowledge to reevaluate the factual basis of the impugned orders. The Court, in exercise of judicial review, is not concerned with the correctness of the findings of fact on the basis of which the orders are made so long as those findings are reasonably supported by evidence. In the words of Justice Frankfurter of the U. S.

Supreme Court in Railroad Commission ofTexas v. Rowan & Nichols Oil Company, 311 US 570-577, 85 L. ed. 358, 362: "Nothing in the Constitution warrants a rejection of these expert conclusions. Nor, on the basis of intrinsic skills and equipment, are the federal courts qualified to set their· independent judgment on such matters against that of the chosen state authorities ..... When we consider the limiting conditions of litigation-the adaptability of the judicial process only to issues definitely circumscribed and suscepti- I) ble of being judged by the techniques and criteria within the special competence of lawyers-it is clear that the Due Process Clause does not require the feel of the expert to be supplanted by an independent view of judges on the conflicting testimony and prophecies and impressions of expert witnesses''. This observation is of even greater significance in the absence of a Due Process Clause. Judicial review is not concerned with matters of economic policy.

The Court does not substitute its judgment for that of the legislature or p its agents as to matters within the province of either. The Court does -<( not supplant the "feel of the expert" by its own views. When the legislature acts within the sphere of its authority and delegates power to an agent, it may empower the agent to make findings of fact which are conclusive provided such findings satisfy the test of reasonableness. In all such cases, judicial inquiry is confined to the question 0 whether the findings of fact are reasonably based on evidence and whether such findings are consistent with the laws of the land. As stated by Jagannatha Shetty, J. in Mis. Gupta Sugar Works, (supra): "the court does not act like a chartered accountant nor acts · like an income tax officer. The court is not concerned with any individual case or any particular problem. The court SITARAM SUGAR CO. LTD. v. U. 0. 1. [THOMMEN, J.

[ 949 only examines whether the price determined was with due regard to considerations provided by the statute. And whether extraneous matters have been excluded from determination. " Price fixation is not within the province of the courts. Judicial function in respect of such matters is exhausted when there is found to be a rational basis for the conclusions reached by the concerned authority. As stated by Justice Cardozo in Mississippi Valley Barge Line Company v. United States of America, 292 US 282-290, 78 Led 1260, 1265: "The structure·of a rate schedule calls in peculiar measure for the use of that enlightened judgment which the Commission by training and experience is qualified to form ..... It is not the province of a court to absorb this function to itself ..... The judicial function is exhausted when there is found to be a rational basis tor the conclusions approved by the administrative body".

It is a matter of policy and planning for the Central Government to decide whether it would be on adoption of a system of partiill control, in the best economic interest of the sugar industry and the general public that the sugar factories are grouped together with reference to geographical·cum-agro-economic factors for the purpose of determining the price of levy sugar. Sufficient power has been. delegated to the Central Government to formulate and implement its policy decision by means of statutory instruments and ·executive orders. Whether the policy should be altered to divide the sugar industry into groups of units with similar cost characteristics with particular reference to recovery, duration, size and age of the units and capital cost per tonne of output, without regard to their location, as recommended by the BICP, is again a matter for the Central Government to decide.

What is best for the sugar industry and in what manner the policy should be formulated and implemented, bearing in mind the fundamental object of the statute, viz. , supply and equitable distribution of essential commodity at fair prices in the best interest of the general public, is matter for decision exclusively within the province of the Central Government. Such matters do not ordinarily attract the power of judicial review. We would, in this connection, recall the words of Justice Frankfurter in Secretar)'__of Agriculture, etc. v. Central Roig Refining Com- pany, etc. , 338US615-617,94 Led391-392: "Congress was ..... confronted with the formulation of policy peculiarly with its wide swath of discretion. It would be a singular intrusion of the judiciary into the legislative process to extrapolate restrictions upon the formulation of such an economic policy from those deeply rooted notions of justice which the Due Process Clause expresses ..... ".

"Suffice it to say that since Congress fixed the quotas on a historical basis it is not for this Court to reweigh the relevant factors and, perchance, substitute its notion of expediency and fairness for that of Congress. This is so even though the quotas thus fixed may demonstrably be disadvantageous to certain areas or persons. This Court is not a tribunal for relief from the crudities and inequities of complicated experimental economic legislation". It is important to remember that the division of the industry on a zonal basis for the purpose of price determination has been accepted without question by almost all the producers with the exception of a few like the petitioners.

Even if it is true that the petitioners as individuals are at a disadvantage and have suffered losses on account of 1£ the present system-an assertion which has not been established and which by its very nature is incapable of determination by judicial review-that is not sufficient ground for interference with the impugned orders. We are not satisfied that the decisions of this Court in Anakapalle, [1973] 2 SCR 882 and Panipat, [1973] 2 SCR 860 require reconsideration in any respect. We see no merit in the challenge against the impugned orders. The civil writ petitions are, in ' the circumstances, dismissed. However, we do not make any order as to costs. P. S. S. Petitions dismissed.