SUKHNANDAN SARAN DINESH KUMAR & ANOTHER ETC. ETC. v. UNION OF INDIA & ANOTHER ETC. ETC

Citation: [1982] 3 S.C.R. 371

Court: Supreme Court of India

Bench: D.A. DESAI, A. VARADARAJAN

Judgment text

SUKHNANDAN SARAN DINESH KUMAR & ANOTHER ETC. ETC. v. UNION OF INDIA & ANOTHER ETC. ETC. March 3, 1982' [D. A. DESAI, AND A. VARADARAJAN, JJ. ] Sugar Cane (Control) Order 1966, Clauses 3, 3A, 4 and 4A & U. P. State Government Notification dated September 3, 1980. • j Sugar Cane brought in bundles-Binding material-Grant of rebate-Whb ther valid and reasonable. The raw material for manufacturing sugar or Khands~ri sugar is sugarcane. When the vacuum pan process is employed the end product is called sugar and when the open pan process is employed the end product is called Khandsari sugar. In order to extend protectiOn to the farmers who had undertaken raising of sugarcane crop, the Central Government issued the Sugarcane (Control) Order 1966. Clause 3 of this Order conferred power on the Central Government to fix minimum price of sugarcane to be paid by produ~rs of sugar for sugarcane purchased by them.

C1ause 4 conferred similar power to fix the minimum price to be paid by th" producers of khandsari sugar for the sugarcane purchased. Clause 3A which was introduced on September 24, 1976 conferred power on the Central Government and various other authorities to allow a suitable rebate in regard to the weight of the binding material not exceeding 0. 62S Kg. per quintal of sugarcane, when sugarcane was purchased by the producer of the sugar. Later, Clause 4A ·was introduced on March 20, 1978,. to provide for the rebate that can be deducted from the price paid for sugarcane by prp AN SARAN v. UNION (besai, J. ) 6. To strike the balance between the conflicting interests not only the State acquired power to fix minimum price of sugar and khandsari sugar but that this wholesome effort may not work to the disadvantage of the sugarcane growers another weaker section of th~ society, the power to prescribe rate of rebate was acquired.

And the power to fix price or minimum price comprehends the power to so regu1ate supply as to ensure the price so fixed and to ensure that in the name of unauthorised and unwarranted deduction the price fixed or negotiated is not rendered illusory. [393 G-H; 394 A) ORIGINAL JURISDICTION : Writ Petition Nos. 0443-44/80, • 8829-30, 9123-24, 370·87, 777•796, 658·62, 732·63, 824-31, 847-62, 1080-1103, 1131-52, 8916, 9071-74. , 9130-32, 9176·79, 8965, 8971-72, 9347-48, 9352-67 of 1981. (Under Article 32 of the Constitution of India) AND Writ Petitions Nos. 14-19/82, 333-25, 458-96, 1307-17, 1410-13, 1595, 8268-72 of 1981 and 152 of 1982. · (Under article 32 of the Constitution of India) C. M. Lodha. in W. P. No. 6443-44/80, Shanti Bhushan, in WP. Nos. 732·63, 3423-25/81-S. N. Kackar, in W. P. 777-96 & 1131-52 of 81, R. K. Jain, S. Mitter, K. K. Mohan, N. S. Das Bahl, • Rameshwar Dial and Madan Gopal Gupta for the Petitioners. G. N. Dikshit and Mrs. Shobha Dikshit for Respondents.

Girish Chandra and Miss A. Subhashini for Union of India in W. l'. Nos. 6443-44/80. (> The Judgment of the Court was delivered by : ' ;. DESAI, J. Even an innocuous marginally regulatory measure affecting the sugar trade at fringes is sufficient for this powerful ipdustry to invade the courts with petitions galore almost proclaiming that there should be hands off policy in respect ofthis trade. The filimsty albeit untenable grievance made in this group of petitions would underscore the truth of what is just stated. In exercise of the power conferred by clause (4) third proviso -· ~ of the Sugarcane (Control) Order, 1966, ('Control Order' for short), the 2nd respondent-State ofUttar Pradesh, with the permission of SUPREME COURT RBPORts [1982] 3s. c. il. the 1st respondent Union of India, issued Notification dated September 3, 1980, which ·is impugned in these petitions. The impugned Notification reads as under : "Sr. No. 398 A (Ka) 13-38-16, 56 • Government Gazette, U. P.

Extraordinary Legislative Supplement Part 4, Seciion (b) (Kha) ... Order Lucknow, Wednesday, 3rd. September, 1980. Notification P. As. ~306 In exercise of the powers conferred by clause 4 proviso 3 of the Sugarcane Control Order, 1966, the Governer, with the permission of the Central Government, allows in Uttar Pradesh in respect of Khandsari units, producing Gur, rab or Khandsari sugar, where sugarcane is brought in bundles and is weighed as such, a rebate in regard to the binding material at 0. 650 kilograms per quintal. By Order, R. Basudev, Secretary" • It was stated that there was a printing error in mentioning the figure '0. 650 kg. ' and a corrigendum bas been issued to correct it to '0. 625 kg. ' per quintal in the Notification. Tbe allegations in all the petitions are identical and, therefore, G. we would state a few representative facts from the writ petition , filed by M/s. Sukhnandan Saran Dinesh Kumar and Another.

The petitioners are producers of sugar by open pan process, the product being described as Khandsari sugar. This term is to be understood in contra-distinction to the marketable commodity called 'sugar' -which is produced by vacuum pan process. The raw material for manu- silkllNANbAN SARAN v. UNION (Desai, i. ) factoring sugar or Khandsari sugar is sugarcane. The petitioners have set up a factory for manufacturing khandsari sugar by open pan process. The petitioners buy sugarcane from the sugarcane growers. In order to extend protection to the farmers who · have • undertaken raising of sugarcane crop, tbe Central Government issued the Control Order in exercise of the power conferred by 8 section 3 of the Essential Commodities Act, 1955. By clause 3 of this order, power was conferred on the Central Government to fix minimum price of sugarcane to be paid by producers of sugar for sugarcane purchased by them.

Clause 4 confers similar power to fix the minimum price to be paid by the producers of khandsari sugar for sugarcane purchased by them. Other clauses of the Order for the present purpose are not relevant. Clause 3A was introduced by GSR 815 (E)/ESS. COM. /Sugarcane dated September 24, 1976, which, inter a/ia, conferred power on the Central Government and various other authorities mentioned therein to allow a suitable rebate in regard to the weight of the binding material not exceeding 0. 625 kg, per quintal of sugarcane, when sugarcane was purchased by the producer of sugar. Subsequently, by Notification GSR 197 (E)/Ess. Com. /Sugarcane dated March 20,1978, Clause 4A with the marginal note "Rebate that can be deducted from the price paid for sugarcane by producers of Khandsari sugar" was introduced. Clauses 4 and 4 A are material for the present discussion and they may be extracted : "4.

Minimum price of sugarcane payable by producers of [(handsari sugar :~ The Central Government or a State Government, with the concurrence of the Central Government, may, by notification in the Official Gazette, from time to time, fix the minim11m price or the price of sugarcane to 'be paid by producers of khandsari sugar or their agents for the sugarcane purchased by them : . x x x Provided also that the Central Government or, with the approval of the Central Government, the State Government, may in such circumstances and subject to such con- ditions as it may specify allow a suitable rebate in the price so fixed. " ' · *"4A.

Rebate that can be deducted from the price paid for sugarcane by producers of Khandsari sugar : A producer of khandsari sugar or his agent shall pay, i for the sugarcane purchased by him, to the sugarcane grower or the sugarcane growers' co-operative society, either the minimum price ·of sugarcane ·fixed under clause 4, or the price ·agreed to between the producer or bis agent' and the sugarcane grower or the sugarcane growers' co· operative society, as the case may be (hereinafter referred to as tbe agreed price : ) Provided that : x x x x x x (iii) Where the sugarcane is brought bound in bundles and weighed as such, the Central Gove. rnment, or, with the approval of the Central Government, the State Government or the Director of Agriculture or the Cane Commissioner or the District Magistrate within their respective jurisdiction, may allow a suitable rebate in regard to the weight of the binding material not exceeding 0.

625 Kilograms per quintal of sugarcane; and, x x x , ·,( Clause 4 c0nferred power on the Central Government or a State Government with the concurrence of the Central Government to fix the minimum price or the price of sugarcane to be paid by producers of khandsari sugar or their agents for the sugarcane purchased by them. The second and third proviso to clause 4 were simultaneously introduced with clause 4A. By the Third proviso to clause 4, power was conferred on the Central Government or * Inserted vide Notification No. GSR 197 (B)/Bsi. Com. /Sugarcane dated 20. 3. 78, . 51. JltllNANl>AN SAl\AN v. UDION (Desai, J. ) 319 with the approval of the Central Government on the State Govern· ment to allow a suitable rebate in the price fixed in exercise of the power conferred by clause 4. The purpose underlying the proviso is manifest.

If the minimum price or price of sugarcane to be paid by producers of khandsari sugar is fixed, it is incumbent upon the producers of khandsari sugar to pay that price and nothing less than that price on the pain of criminal prosecution. The authorities clearly envisaged a situation where sugarcane may be brought in bundles to the unit manufacturing khandsari sugar and if the sugarcane is weighed with the binding material used, the minimum price or price fixed by the Government to be paid per quintal of sugarcane would ipso facto include the weight of the binding material and if the power to grant rebate is not conferred the producer of khandsari sugar will be under an obligation to pay the same price even if the part of the payment was for something other than sugarcane, namely, binding material. The raison d'etre behind conferring this power is thus clearly discernible.

Clause 4A made it obligatory to pay the minimum price of sugarcane if so fixed under clause 4 or in the absence of price fixation, the negotiated price. Proviso (iii) to clause 4A confers power to allow rebate not exceeding 0. 625 kg. per quinta:I of sugarcane where sugarcane is brought in bundles and is weighed as such, i. e. with the binding material. Armed with this power, the 2nd respondent after obtaining approval of the Central Government, as per letter dated September. 6, 1979, issued the impugned notification directing tha. t where sugarcane is brought in bundles and is weighed as such a rebate in regard to the binding material at 0. 625 kg. per quintal be allowed. Before adverting to the contentions raised in this group of petitions it may be made distinctly clear that though clause 3A was . inserted in the Control Order in 1976 conferring similar power on the Central Government. or with the approval of the Central Government, on the State Government to allow rebate at 0.

625 kg. per quintal of sugarcane purchased by manufacturers of sugar, such rebate was being prescribed by the Central Government since 1968, The Gazettes oflndia setting out the notifications for tbe years 1968, 1971, 1972 and 1975 were 11bown to us. The notifications were issued in exercise of the power conferred by clause 3 of the Sugarcane Control Order, 1966. By the notifications hereinabove referred to minimum price of sugarcane per quintal payable by each sugar mill enumerated in the Schedule to the notification was fixed. ' jgo SUPREME cOURT REi>OlTS ll982j 3 s. c. tl. While fixing this minimum price the Central Government authorised· itself as also conferred power on the State Governments or the Commissioner or Director of Agriculture within their jurisdiction to allow a suitable rebate in regard to the weight of binding material • not exceeding 0. 625 kg. per quintal of sugarcane.

It thus clearly transpires that the power to fix the minimum price of sugarcane · comprehended the power to fix rebate to be allowed for binding material where sugarcane is brought to the factory or the producing centre bound in bundles. However, to avoid any quibbling about the power to fix such. rates of rebate, clause 3A was added in 1976 and an identical clause 4A was added in 1978 acquiring power to prescribe rebate to be allowed for binding material where sugarcane is brought to the khandsari sugar producing units bound in bundles and weighed as such. Thi~ would at least show that since 1968 rebate at 0. 625 per quintal of sugarcane purchased by producers of sugar is being allowed. Sugarcane is a raw material both for sugar and khandsari sugar, the distinction between them being that when vacuum pan process is employed the end product is called sugar and when open pan process is employed the end product is called khandsari sugar.

In case of either of them, the grower of sugarcane has hardly anythi. ng to do with the end product. After the grower sells his sugarcane, as far as he is concerned, it is immaterial whether the producer produces sugar or khandsari sugar or rab or jaggery or shakkar. Therefore, clause 4A was introduced to avoid discrimination between producers of sugar and khandsari sugar in the matter of rebate to be allowed when the grower of sugarcane brings the same bound in bundles to be delivered to the producer. The producers of sugar have without a murmur accepted this position but once the producers of khandsari sugar are brought within the purview of an identical provision, they have filed the present petitions. ···~ Mr. C. M.

Lodha who led on behalf of the petitioners contended that the power to prescribe rate of rebate under third proviso to clause 4 is conditional upon the fixing of minimum price or price of sugarcane, and as the pre-condition to exercise of power is not satisfied, the authorities cannot ex~rcise power to prescribe rate of rebate. The submission is that where minimum price of sugarcane is fixed by the Government, in order to ensure that that price is paid for sugarcane and simultaneously to avoid any unauthorised deduc- . ff tion, the' Central Government or the State Government may prescribe the rate of rebate to be allowed beyond which no deduction ,, StiKllNANbAN SARAN v. UNION (Desai, J. ) 381 under the camouflage of rebate for binding material can be. resorted to by the purchaser; but if the power to fix minimum price or price o( sugarcane is not exercised, there does not arise a situation in which the power to prescribe rebate to be allowed for binding material can be exercised.

It was urged that the power to fix price or mfoimum price of sugarcane and to prescribe r~te of rebate are not independent but they are inter-dependent and one cannot be exercised without exercising the other. Clause 4 confers power on the Central Government or a State Government with the concurrence of the· Central Government to fix the minimum price or th. e price of sugarcane to be paid by producers of khandsari sugar for sugarcane purchased by them. Third proviso to clause 4 provides that the Central Government or with the approval of the Central Government, the State Government may in such circumstances and subject to such conditions as it may. specify, allow a suitable rebate in the price so fixed. If the provision were to end with clause 4, a serious contention would arise whether the power to determine rate of rebate can be exercised de horse the power to fix minimum price or price of sugarcane or can be unilaterally exercised.

Undoubtedly, if the power was exercised under clause 4 probably the pre-condition to exercise of power of prescrib-· ing suitable rebate viz. fixing of minimum price or prlce of sugarcane if not satisfied, the power to prescribe rate of rebate could not have been exercised because the latter power for its exercise is dependent npon the power to fix price or minimum price. Both the powers are interrelated as would be evident from the language of third proviso : " .. . ,as it may specify, allow a suitable rebate in the price so fixed. " The rebate is thus co-related to price fixed. Therefore prima facie it appears that the power to fix rate of rebate under the third proviso to clause 4 cannot be exercised without exercising the power to fix price or minimum price. It being a conditional power, the satisfaction of condition giving rise to the occasion to exercise of power is a must.

Therefore, before the rate· of rebate is prescribed the price or the minimum price of sugarcane as provided in the substantive part of clause 4 will have to be fixed. From the price so fixed a rebate has to be allowed and, therefore, the power was conferred by the third proviso to prescribe the rate of rebate. The rebate contemplated by the third proviso to clause 4 is not necessarily confined to rate of rebate for binding material only but per- ~82 SUPREMR COURT REPORtS [1982] j s. c.. t. missible rate of rebate from the price or minimum price fixed under the substantive provision of clause 4 can be prescribed. Clause 4A stands on an independent footing and it is independent of clause 4. Clause 4A is neither inter-dependent nor interrelated to clause 4.

Clause 4A provides that the producer of khandsari sugar or his agent shall pay for the sugarcane purchased by him to the sugarcane grower or the sugarcane growers' cooperative society either the minimum price of sugarcane fixed under clause 4 or the prico agreed to between the 'producer or his agent and the sugarcane grower or the sugarcane growers' co-operative society as the case may be. Clause 4A thus visualises a situation in which either the minimum price of sugarcane is fixed under clause 4 or where no such price if fixed, the price agreed to between the sugarcane grower and the producer who purchased sugarcane and even in this latter situation the power to prescribe rate of rebate only in respect of binding material was conferred on the Central Government or the authorities set ont in the third proviso to clause 4A.

Therefore, fixing of the minimum price may be a pre-condition to the exercise of power under the third proviso of clause 4, as far as clause 4A is concerned, even where the price to be paid by the producer to the sugarcane grower is the one negotiated between the two, the producer or his agent will have to allow that much rebate and no more for binding material if notified in exercise of the power conferred by the third proviso. This literal construction accords with the intendment of the provision as would be presently pointed out. Mr. Lodha urged that if the purchaser and seller of sugarcane are free agents to negotiate the price, what useful purpose would be served by prescribing the rate of rebate statutorily ? Says Mr. Lodha, that if higher rebate is to -be allowed, the producer of . • A khandsari sugar and the grower of sugarcane would work out the price accordingly and if less rebate is allowed, it will have a direct impact on the negotiated price.

This submission proceeds on the unwarranted assumption that a producer of khandsari sugar and the grower of sugarcane are capable of negotiatin& the price as free agoots and stand on a footing of equality. Sugarcane is a perishable commodity. The grower of the sugarcane is at the mercy of producers of sugar or khandsari sugar. It would be uneconomic for him to transport sugarcane to a long distance. By the very nature of the product, it being perishable and transport SUKHNANDAN SARAN v. UNION (Desai, J. ) 383 over a distance being uneconomic, the grower of sugarcane bas limited choice in selecting the producer to whom it could be sold. Between the producer of khandsari and the grower of sugarcane, the first one is primarily in a position to dominate and dictate and they do not operate on the level of equality. Unquestionably, therefore, the grower of sugarcane in relation to the producer of the khandsari sugar would be weaker and it is he who requires to be protected.

8 Now, if the protection of fixing of minimum price is not resorted to because the authorities under the Control Order may have information before them that looking to the supply and demand and the ~'--- demand and the market economy, the grower of sugarcane would be able to obtain a reasonably fair price for his labour, the only thing which is required to be protected against is inequitous, unauthorised and impermissible deductions. It appears that in the State of Uttar Pradesh and Bihar the weight of the binding material when sugllrcane is brought in bundles to the producer has been a fruitful source for the producers of khandsari sugar to make deductions from the weight of sugarcane delivered to them in such an exorbitant quantity as to deny in real money worth the negotiated price. This can be demonstrably established by the claim made in these petitions that the weight of binding material is 2. 5 kg. per quintal of sugarcane while the authorities have prescribed only 0. 625 kg.

per quintal of sugarcane and the national average as worked out by National Sugar Institute, Kanpur is 0. 741 kg. per quintal of sugarcane. If the price of sugarcane is fixed per quintal and the deduction is made as contended herein, it does not require imagination or mathematician's intellect to work out the invisible loss inflicted by the subtle method on the growers of sugarcane. Therefore, while retaining the power to fix minimum price or price to be paid and also in a given situation leaving it to the purchaser of sugarcane and grower of sugarcane to negotiate the price in order to eschew any exploitation of the weaker section between the two, the power to prescribe the rate of rebate was acquired and can be rightly enforced. Therefore, viewed from either angle, there is no merit in the submission that unless the power •to fix the price or minimum price is exercised there is no power to prescribe the rate of rebate.

Language of clause 4A on a literal or grammatical construction negatives the submission and it must as well be rejected looking to the intendment underlying this provision. Mr. Shanti Bhushan, learned counsel appearing for the petitioners in Writ Petitions No. 734 to 763 urged that assuming thl! t 384 SUPREMll COURT REPORTS [1982f 3 s. c. a' power to prescribe rate of rebate under clause 4A read with the third proviso could also be exercised where price of sugarcane may be left to be negotiated between the growers of sugarcane and pro- . ducers of khandsari sugar, yet the quantum as determined must at least have reasonable relation to the reality of market situation as well as prevalent trade practice. He urged that viewed from this 8 angle fixation of rate of rebate at 0. 625 kg.

per quintal of sugarcane is unjust and unfair' and therefore the Court should strike down the impugned notification on the ground that the determination is arbitrary and utterly unrelated to trade and practice. Simultaneously he contended that assuming that national average of weight of binding material works out at 0. 741 kg. per quintal as submitted by the Respondents on the strength of the report of National Sugar Institute, Kanpur, there was absolutely no justification for reducing the same to 0. 625 kg. per quintal and therefore prescribed rate of -rebate apart from being arbitrary is unrelated to trade and prac(ice and deserves to be quashed. In this connection, he referred to paragraph 6 of the counter-affidavit ·filed by Shri H. A. M. L. Vaz, Deputy Secretary, Ministry of Agriculture, Department of Food in which it is stated as under : "The limit of_ 625 grams per quintal was adopted, as it was allowed by the States of U. P.

and Bihar before the Cenlial Government took over the control over the price of sugarcane, and has continued since then. Representations were received from the Associations of the vacuumpan sugar mills etc. again! that limit. A survey was carried out by the National Sugar Institute, Kanpur, and the average weight of the binding material worked out to 0. 741 kg. , per quintal for the winter season of the selected factories spread over· the whole country. ' Subsequently, on receipt of a representation from the Madras State Federation of Co-operative Sugar Factories, views of the State Governments in the matter were also called for, with the specific request that they might also ascertain the views of the cane growers. The major sugar producing State Governments of U. P. , Punjab, Rajasthan, Maharashtra, Karnataka, Andhra Pradesh, Pondicherry, West Bengal, Orissa, Madh~a Pradesh, Kerala and Gujarat, recommF.

nded that the limit already prescribed was adequate and that there was no need to revise it. The Bihar Govern- Jlle! lt bad alreadr indicated the same view. Hence fixation SUKHNANDAN SARAN . v. UNION kEMil coililT REPORTs (1~82) ~ S. C. ll.. so regulate supply as to ensure the price so fixed and to ensure that in the name of unauthorised and unwarranted deduction the price fixed or negotiated is not rendered illusory. Viewed from either angle the restriction is both reasonable and it is imposed in the interest of general public, and bas a rational relation to the object sought to be achieved by the Control Order. These were all the contentions in this batch of petitions and as none has merit in it, the petitions fail and are dismissed with costs; hearing fee in one· set. ,,r ~"'--;- N. V. K. Petitions dismis$ed. . f-